One of the more common reservations that people have about filing for Chapter 7 is the belief that it may result in them having to surrender some of their assets to the bankruptcy trustee for liquidation.
While this is certainly an understandable concern, the reality is actually much different than people might imagine. Indeed, the law provides for what are known as bankruptcy exemptions that, when exercised, often enable a person to keep most or even all of their property.
By way of illustration, consider a person’s car. While the idea of potentially losing a primary mode of transportation undoubtedly sounds like a definite deal breaker as far as filing for Chapter 7 is concerned, bankruptcy exemptions greatly limit this possibility.
In general, Florida’s motor vehicle exemption dictates that if the equity in a person’s automobile is up to $1,000, the bankruptcy trustee cannot seize the vehicle to repay creditors.
For those unfamiliar with this concept, you are considered to have equity in your vehicle if it’s worth more than the amount you still owe for it. In other words, it’s calculated by subtracting the current amount of the auto loan from the vehicle’s actual value.
To illustrate, consider someone who owns an SUV currently worth $8,000 and who owes $7,000 on the auto loan. Here, the person has $1,000 of equity in the car and, as such, can protect their car via the motor vehicle exemption.
While it would seemingly be a different story if the SUV was worth $8,000 and the owner owed $5,000 on the loan, it’s important to understand that there are additional bankruptcy exemptions under Florida law that could enable the vehicle owner to exempt considerably more than $1,000 in equity.
We’ll explore these additional bankruptcy exemptions in a future post.
In the meantime, if you have any questions or concerns regarding Chapter 7 or bankruptcy in general, please don’t hesitate to consider speaking with an experienced legal professional.