Is keeping cars in bankruptcy possible while still discharging credit card debt? We want to file a chapter 7 bankruptcy. How do we tell if we make too much money to even file a chapter 7?
Whether or not bankruptcy filers can keep any individual piece of property depends on many factors, including how much property is owned and what exemptions are available to cover the property.
Many sources in print and on the internet exist on the subject of property in bankruptcy. So the answer to your question requires a good summary. In 2005 Congress amended the bankruptcy laws, imposing a “means test”. This requires you to add up all of your household’s monthly income over the 6 calendar months prior to the date of filing. You qualify to file under Chapter 7 only if this number comes in below the census bureau’s statistics for median family income in your state.
If resulting income exceeds the median, you have a second chance to work the numbers through the full means test. The calculations are spelled out on bankruptcy form B22A. While this appears to be simple math, using some numbers supplied by the IRS, it can get complicated. It’s a good idea to retain an experienced bankruptcy attorney who understands the process to do this for you. Here’s a link to an article on calculating the means test: Means Test Numbers.
If your income still surpasses the applicable median family income, then you would likely qualify for a chapter 13, which requires that you pay a certain percentage of your debts in a chapter 13 payment plan over the next 3 to 5 years.
So, can I keep my car if I file Chapter 7 Bankruptcy?
The next question is whether assets, including any equity value in your real estate, car(s) or other property is protected by exemptions available under your state law or federal exemptions. The basic concept behind bankruptcy exemptions allows those filing bankruptcy to keep modest essential possessions.
Federal law controls bankruptcy. At the same time each state sets its own law on bankruptcy exemptions and can even decide whether those filing can even use the federal exemptions.
Finally, bankruptcy requires review of one’s entire financial situation including all debt, income, assets and exemptions. Blog articles are great for spelling out the basics. But, before actually filing it is highly recommend that you seek representation from an experienced bankruptcy attorney in your jurisdiction. My office handles bankruptcies in New Hampshire and Massachusetts.
More on bankruptcy and other legal topics here.