Will I need to buy another car?

[Waited2long]

I am just starting the process of filing Chapter 7 and will be meeting with my lawyer in a few days. I am confused about one thing he said. My wife and I each have a car and they are both paid off. They are nothing real special, a 6 and 7 year old Honda. My lawyer said he may not be able to exempt both cars, depends on wildcard. We are honest people and need a fresh start after trying to keep up with our credit card debt for years. Whe would the trustee take the car when we both need them for commuting and put us in debt immediately to buy another car. Sorry if I sound confused but this is my first post and we are both so nervous!

[Jacey]

If you're filing for chapter 7 and your income is over the median, a car payment will help you on your expenses. You have to pass the means test (form 22a) to file a chapter 7 instead of a chapter 13. You have to find out what your exemptions are (your state or federal if your state allows it) and see if you can keep your cars. Your attorney can tell you all of this, or you can start looking if you're anxious to figure it out. The game of BK doesn't make sense, but if you can swing a chapter 7 because your expenses are high enough instead of being pushed into a 13 and paying some back every month for 3-5 years? We bought a car before filing because a) my credit will of course stink and rates will be high for quite some time and b) the payment on that car is what pushed our expenses over the line and allowed us to file a chapter 7 and c) my other car was expensive to maintain and about to even more expensive. If you have a lawyer, he can explain this to you. There are some rules about what an attorney can and cannot recommend, so you have to read between the lines at times OR ask this forum. Of course you shouldn't go out and incur a car payment if you won't be able to afford it once your unsecured debt is discharged...that just puts you right back in the tough spot of not having enough $$. I know I'd rather have a chapter 7 and a newer (reliable, used) car than a chapter 13 and a payment plan for 5 years anyway with older cars that need more upkeep.

[Waited2long]

Thanks for the info Jacey, esp about reading between the lines with an attorney!

We are below the median income, my problem is we own the cars outright. They are reliable and I would like to keep them. I just don't understand why my lawyer says there is a possibility of one of them being taken? So once my unsecured debts are discharged I will be left in the position of going out and buying another car (and starting the cycle of being in debt again.) I was hoping that I would only be left to pay my mortgage and utilities....we have the cars we need!

Thanks again, you're right, some things about it just don't make sense. Oh, by the way, this forum is fantastic!

[Jacey]

It is fantastic, and I find answers on here that make me able to sleep at night. You have to have enough exemptions to cover your property, which depends on your state. If you own too much property and can't exempt it, the trustee takes the non-exempt items and sells it to give funds to your creditors. In Arkansas, we are allowed to use our state or the federal exemptions. Since the federal ones were much better, that's what we chose. Your car value generally (at least here) goes by the Kelly Blue Book private party value. If there are needed repairs, you can get quotes on getting the work done and subtract that from the value of your car. For example: 2001 Honda Accord on KBB.com (this is a guess) lists at $7,500 for a private party sale. If your hood is damaged and needs to be replaced, the estimate for fixing it can be deducted. If that's $1,500, your value is $6,000. If you can exempt that in your state, you're fine. If not, you either give it up or ask to pay the trustee for the nonexempt amount and keep your car. In my case, our federal exemption on our house was so high that the difference could be used to cover the cars and we even got to keep our boat. There are many posts here about valuing things, and make sure you look at them and don't value your stuff too high. I think I made that mistake and it only caused me additional anxiety as I didn't have enough exemptions to cover my whole tax return. I think trustees in my area like no-asset cases so they really looked at me funny when I couldn't get under the exemptions. Looking back, I could have shaved a few dollars off things here and there and been a no-asset case from the beginning without being dishonest.

[Waited2long]

I live in Massachusetts and it looks like the state exemptions will get very generous beginning in April:


Property Current New
Money for utilities $75 $500
Furniture. $3000. $15,000
Books $200 $500
Tools. $500 $5000
Stock in trade. $500 $5000
Provisions for family $300 $600
Fishing equipment $500 $1500
Sewing machine $200 $300
One computer & one Tv none no stated dollar limit
Rent money $200 $2500
Cash or savings (execution$125. $2500 on any day
Wages (execution) $125 greater of 85% of gross wages or 50 times min. wage per week
Automobile $700 $7500 wholesale, $15000 for disabled or elderly
Personal property none $1000 to $6000
Jewelry none $ 2500
Wages (trustee processs $125 greater of 85% of gross wages or 50 times min. wage per week
Bank account (trustee processs$125 $2500


Homestead exemption is $500,000

One good thing about living in this state.

Looking around there is no way I have 15,000 in furniture. You are right about overvaluing this stuff. I can imagine how little money I would get for my "stuff"!

One thing that made me curious is the 7500.00 wholesale exemption for a car. Do you know how to find wholesale value?


This site is a great anxiety buster and really helps with the feelings of guilt I was starting to get.