If you plan to file for a Chapter 7 bankruptcy in Texas, you may be worried about losing your car and other assets you need for basic living. Here’s what to know about filing your vehicle with Chapter 7 and how an experienced bankruptcy attorney can help you navigate the challenging process of applying to the court for debt relief.

A Primary Vehicle Is Generally Exempt

If you pass the means test and qualify for a Chapter 7 bankruptcy, you likely don’t have more than one or two vehicles. Your car is usually exempt from liquidation and if you are married, two vehicles may be considered exempt. This means you won’t have to sell your car to pay the bankruptcy court, because the court recognizes that you need your vehicle to get to and from work, among other important things.

The Value of the Vehicle Matters

Although you are allowed to keep your car, generally you will only be allowed a certain amount of equity in the vehicle. In most Chapter 7 bankruptcies, the exempt vehicle is under the limit and the owner is able to keep it. This is because most people who qualify for a Chapter 7 don’t have expensive or luxury vehicles.

If your car is over the limit, you may be compelled to sell it so you can purchase a less expensive vehicle and remit the remainder to the bankruptcy court. You will need to know the fair market value of your vehicle to determine if it is under or over Chapter 7 limits. This is not what you paid for your vehicle or how much you still owe on an auto loan. It’s what your vehicle could be sold for on the market in its current condition would cost.

Vehicle Redemption & Reaffirmation In a Chapter 7 Bankruptcy

If you are still making payments on your vehicle, you may be able to pay the car’s value to the lender in a lump sum to buy your vehicle outright. This is called a vehicle redemption agreement. You may also qualify for a reaffirmation agreement, where you continue making payments on your vehicle under the same or similar terms as before instead of surrendering your car.

Reach Out to a Texas Bankruptcy Attorney Today

It’s critical that you reach out to a Texas bankruptcy lawyer as soon as you learn that you may need to file for debt relief. Call Sims Bankruptcy Law, PLLC today by dialing 469-751-7467 (DFW) or 254-304-7161 (Central Texas).