, Derry, New Hampshire

Crime / Court

January 18, 2012

Filing Chapter 7 may not mean you lose your car

I need to file a Chapter 7 bankruptcy because I lost my job last year. Before that, I kept up with my credit card payments, but I had to live on the cards and fell way behind.

I just started a new job for much less income than before, and there's no way I can make it without filing bankruptcy. Can I file and still keep my car? Without the car, I can't drive to work 45 minutes away.

First, my condolences for the job loss and my best wishes with the new employment. Most people who file a Chapter 7 end up saving the car and here's why: Chapter 7 is called a "liquidation," meaning the trustee can take the car and sell it to pay creditors. But, if the vehicle is exempt, as often happens, the car is safe.

Figure out the private party sale value of your car. Let's say you go online to one of the websites and the value for your car is $10,000.

Next, subtract the lien on the car. Say you owe $7,500. That means the equity in the car is $2,500. In your bankruptcy petition, you must disclose the numbers and claim an exemption. Then, you save the car.

The New Hampshire exemption for a motor vehicle is $4,000. In Massachusetts, it's $7,500, unless you are handicapped or over 59, in which case the exemption is $15,000. When we use federal exemptions, a car is exempt up to $3,450.

The car in the above example is safe. Many people owe more than their cars are worth, so the bankruptcy filing does not endanger the car as long as everything is scheduled properly.

Should I contest my uncle's will? My sister and I are his only living relatives. His will left everything to a friend.

I've heard there's a previous will leaving everything to a different friend. When I last spoke to my uncle, he asked for my address. Two months later, he died. No one notified me.

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