This question has to be one of the most frequent questions I hear as a bankruptcy attorney. Most people believe that if they file a bankruptcy they are going to lose everything, including their vehicle. That, in most cases, is just simply not true. In Missouri, you can protect up to $3,000 in vehicle equity during a bankruptcy. If you are married and filing jointly $6,000 of equity in your vehicle will be protected by the Missouri Motor Vehicle exemption. Vehicle equity is the fair market value minus the amount of money owed on the vehicle. For example, if your car is worth $10,000 and your loan on that vehicle is $9,000, your equity is $1,000. You can look up the fair market value of your vehicle on KBB.com or NADA.com.
If you do not have more than $3,000 of equity in your vehicle, keeping your car will not be a problem. You can file a Chapter 7 bankruptcy, reaffirm the debt on the vehicle and keep making the payments. When you do have more than $3,000 of equity in your vehicle and want to keep it, Chapter 13 is possibly a better option for you. A Chapter 13 bankruptcy will allow you to keep your vehicle, paying back the un-exempt portion of the equity to the Trustee over a period of 3-5 years. This money paid to the Trustee will be distributed to your unsecured creditors and you will be able to keep your vehicle. A Chapter 13 bankruptcy is also helpful when you are behind on your car payments and the finance company is threatening to repossess the vehicle or already has done so.
It is also alright to own multiple vehicles. There is no limit to the number of vehicles you can keep during your bankruptcy. You can split up the exemption and apply it to as many vehicles as you would like. The types of vehicles that qualify under the Motor Vehicle Exemption in Missouri are defined as a self-propelled vehicle designed primarily for use on highways. That definition covers most cars, trucks and motorcycles.
If you do have more equity in your vehicle than what is allowed by the exemption and you still want to file a Chapter 7 then the Trustee is likely to sell your car and distribute the money to your unsecured creditors. That is a decision you and your bankruptcy attorney can make before the filing of your case and something that should be discussed before the 341 meeting with the Trustee.
If you have questions about this, or anything else related to bankruptcy, it is my recommendation that you consult with a St. Louis Bankruptcy Attorney today. We offer free consultations at a number of locations.