Article written by Columbia, SC bankruptcy lawyer Daniel Stone
Most Chapter 7 bankruptcy filers do not lose their car to the Chapter 7 Trustee or the car lender. Let’s examine this issue more closely. In regards to the Chapter 7 Trustee, he or she can only obtain possession of your car if you have unprotected equity in your car. Most South Carolina filers can protect at least $5,300 in equity in a car and sometimes more. So if you own car worth $10,000 and you have a car note balance of $5,000, you can protect your car by using the vehicle exemption. In addition, you maybe able in some circumstances to be able to stack a “wildcard exemption” of $5,300 and/or a “tools of the trade” exemption of $1,600. With these numbers, you can see why very few debtors lose their vehicle to the Chapter 7 Trustee.
Now, lets examine the car lender. Can you lose your car to the finance lender in a Chapter 7? My experience has been that as long as you are current on your car note when you file the Chapter 7 and remain current, you are safe from having your car repossessed by the finance company. The car industry argues that a debtor has to reaffirm their car not in a Chapter 7 in order to keep the vehicle. While reaffirming the car note will definitely save your car from being repossessed as long as you remain current, my experience has been that you can keep your car without having to reaffirm. The theory behind this is that individuals are also protected by the South Carolina Consumer Act. In addition, I have yet to see a car repossessed in a Chapter 7 by a car lender when the debtor was current with the payments. Please note I see many benefits to not signing the reaffirmation agreement. The most significant benefit to not signing the reaffirmation agreement is that if you ever have to turn the car back into the finance company, you are not responsible for any deficiency as long as you didn’t sign the reaffirmation agreement.