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Florida’s bankruptcy exemptions and your vehicle

On Behalf of | Mar 22, 2024 | Property Exempt From Bankruptcy

Are you facing financial hardship and considering bankruptcy? If you rely on your car for work, errands or daily life, you might be wondering what will happen to your vehicle during the process.

In the Sunshine State, bankruptcy exemptions play a crucial role in determining whether you can keep your car if you opt to file for Chapter 7 bankruptcy, specifically. Familiarizing yourself with the specifics of Chapter 7 bankruptcy exemptions can help you understand how they may impact your car ownership during bankruptcy proceedings.

Understanding exemptions and their importance

Bankruptcy can allow individuals to discharge most unsecured debts, offering a fresh financial start. However, in rare cases, the bankruptcy court might sell some assets (property you own) to pay back creditors. This is where exemptions come in. Exemptions are categories of property that are protected from being sold during Chapter 7 bankruptcy. The state offers various exemptions, including a specific exemption for motor vehicles.

Motor vehicle exemption: Keeping your car

The state has a relatively low motor vehicle exemption, meaning there’s a limit on the value of your car you can shield from creditors. Single filers can exempt up to $1,000 of equity in their car, whereas married filers jointly filing can exempt up to $2,000 of equity in their car.

Equity refers to the difference between your car’s market value and the amount you owe on any loan for the vehicle. Let’s look at an example:

  • Your car is worth $8,000.
  • You still owe $5,000 on your car loan.
  • Your car equity is $8,000 (value) – $5,000 (loan) = $3,000.

In this scenario, if you’re a single filer, as long as your car equity is less than $1,000, you can likely keep your car. However, if the equity exceeds $1,000 (e.g., a more expensive car with a lower loan balance), the bankruptcy trustee might sell the car and use the proceeds exceeding $1,000 to pay your creditors.

Even if your car falls under the exemption, you might be presented with a reaffirmation agreement from your lender. This is a new agreement to repay the remaining car loan balance outside of the bankruptcy. Reaffirmation can be beneficial if you want to keep your current car loan terms (interest rate, etc.). However, it’s crucial to carefully consider the agreement before signing it to ascertain that it caters to your unique needs.

Florida’s motor vehicle exemption can allow you to potentially keep your car during bankruptcy, provided your car equity falls within the exemption limit. Consulting with a reliable legal team can help you navigate the specific details of your situation and help ensure a smooth Chapter 7 bankruptcy process.


Kingcade & Garcia | A Miami Law Firm