Californians who file for bankruptcy have to choose between two sets of exemptions. One generally favors homeowners. The other generally favors people who do not own real estate.
In the past, the homeowner exemption scheme allowed bankruptcy debtors to exempt (meaning claim the right to keep) automobiles worth up to $3,625. The non-real estate scheme allowed debtors to exempt automobiles worth up to $6,375.
Considering how much even used cars cost these days, these are extremely low numbers. Beginning January 1, 2023, the automobile allowance for both exemption schemes will increase to $7,500. This is great news, although the automobile bankruptcy exemptions in my opinion are still unreasonably low.
To clarify, this does NOT mean you will lose your car if it is worth more than $7,500. If you do not own a home, you are also entitled to more than $30,000 as a wildcard exemption. In most cases, this will easily cover your vehicle.
Only the equity in the car is counted. This means you can deduct the amount owed on an applicable auto loan. (If the car is worth $30,000 and you owe 20,000, the equity (or value to you) is $10,000.)
The people most affected by the low automobile exemption are homeowners. If you own a home AND you have a car with equity, you might find yourself over the exemption limit. In this case, you would have two solutions: 1. pay the trustee an amount equal to the surplus value of the vehicle, or 2. pay the surplus value of the vehicle through a chapter 13.
If you give me a call I can analyze the numbers for you so you can decide which option is best. August Bullock 408 504 4095.