Filing for Chapter 7 bankruptcy requires that you report your personal property to a trustee appointed by the courts. That trustee has to look over the inventory of your assets and determine if you must liquidate or sell off some of those belonging to repay your creditors. Such liquidation is necessary before the courts will discharge the remaining balance on your unsecured debts.
The good news is that you are not at risk of losing all of your property just to get rid of your debt. New Hampshire state law provides you with bankruptcy exemptions. You can use those exemptions to protect certain property from sale in your bankruptcy proceedings.
Can you protect your vehicle in a Chapter 7 bankruptcy?
You can exempt some of your vehicle’s equity
You must report your property to the trustee overseeing your case, and they will have the authority to liquidate some of your assets to repay your creditors before your discharge. The market value of your vehicle and your ownership status will influence how vulnerable your vehicle is in a Chapter 7 filing.
If you financed the purchase of your vehicle and have very little equity accrued, you may simply need to reaffirm the loan on the vehicle during the bankruptcy and continue making payments to keep the vehicle. If you own the vehicle outright or have accrued many years of equity in a financed vehicle, then some of that equity may be vulnerable.
A single person filing for bankruptcy can protect up to $10,000 in vehicle equity, and married couples can double that exemption. You may have to refinance the vehicle and use the excess equity to repay your creditors before you can move forward with your bankruptcy. You can also apply a wildcard exemption worth $7,000 to your property, such as a secondary vehicle.
Provided that the assets you will need to liquidate or refinance are not worth more than the debts you can potentially discharge, Chapter 7 bankruptcy can have a positive impact on your financial situation.