Filing for Chapter 7 bankruptcy in New Jersey can be a powerful tool for individuals struggling with overwhelming debt. However, one of the most common concerns among filers is whether they will be able to keep their car. The answer depends on several factors, including the value of the vehicle, exemptions available under state and federal law, and whether there are any outstanding car loans.

New Jersey Bankruptcy Exemptions and Your Car

When you file for Chapter 7 bankruptcy, your assets may be liquidated to repay creditors. However, exemptions allow you to protect certain property, including a vehicle, from being sold by the bankruptcy trustee. In New Jersey, filers can choose between federal and state exemptions.

• Federal Exemptions: Under federal law, you can exempt up to $4,450 in vehicle equity (as of 2024). If your vehicle is worth more than this and you do not have a loan, any excess equity could be subject to liquidation. However, federal law also provides a wildcard exemption that may allow you to protect additional value.
• New Jersey State Exemptions: New Jersey’s state exemptions are less generous than federal exemptions, offering only $1,000 in personal property protection, which includes a vehicle. Because of this, many filers opt to use the federal exemption system.

What If I Have a Car Loan?

If you still owe money on your car, the bankruptcy process does not automatically eliminate your loan. You will have a few options:

• Continue Making Payments: If you want to keep your car and can afford to make payments, you can reaffirm the loan, meaning you agree to continue paying despite the bankruptcy filing.
• Redeem the Vehicle: In some cases, you may be able to pay the lender a lump sum equal to the car’s market value, which can be beneficial if you owe more than the car is worth.
• Surrender the Car: If you cannot afford the loan or the vehicle has negative equity, you may choose to surrender it, which allows you to discharge the remaining loan balance.

Steps to Protect Your Car in Chapter 7 Bankruptcy

1. Determine Your Vehicle’s Value: Use fair market value estimates to assess how much equity you have.
2. Evaluate Available Exemptions: Consider whether federal or state exemptions provide the best protection for your situation.
3. Decide Whether to Reaffirm, Redeem, or Surrender: Work with an attorney to determine the best course of action based on your financial situation.

How The Law Offices of Andy Winchell, P.C. Can Help

Filing for Chapter 7 bankruptcy can be complicated, especially when it comes to protecting valuable assets like your car. At The Law Offices of Andy Winchell, P.C., we assist New Jersey residents in navigating the bankruptcy process while safeguarding their essential property. If you are concerned about keeping your vehicle, we can help you explore all available options.