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How to Keep Your Car During Bankruptcy Using Exemptions in Santa Ana, Orange County and Riverside

    Orange County Bankruptcy Attorney 1

    California Car and Vehicle Exemption in Santa Ana, Orange County and RiversideChapter 7 is normally called the Liquidation Bankruptcy.  The reason being is that your property is liquidated during the bankruptcy to pay off your debts.  This includes your cars and vehicles.  In other words, the bankruptcy trustee will sell your cars to pay off your debts when you are in bankruptcy.

    However, there are a number of steps, options and factors that you need to be aware of in order to keep your cars.

    Keep your cars and vehicles when you file for bankruptcy

    The Secured/Financed Vehicle

    If you have a loan on your Car and the loan amount is higher than the car is worth, you probably do not need to worry about whether or not you will lose your car during the bankruptcy.  In these cases, there is no reason for the bankruptcy trustee or court to order the selling of your car to pay your unsecured creditors.  The debt on the vehicle is secured, meaning that they will be the first to receive the money if your car is sold.  Since, in our hypothetical, the loan is more than the value of the vehicle, there would be no left over money to pay towards the rest of your unsecured debt.

    The next questions is what do we do if the loan is less than the value of the vehicle, or if the car does not have a loan on it.

    The Motor Vehicle Exemption in California

    The first step is to use the motor vehicle exemption.  In Santa Ana and the rest of California, there are two types of motor vehicle exemptions.  The differences are explained below.  In any case, you can use the motor vehicle exemption to exempt or save the amount of the exemption from the trustee.  Therefore, if your car is worth $1000, or has $1000 of equity, you can place a $1000 exemption on the vehicle.  The trustee would not be able to sell your car because you exempted or saved it from the trustee’s ability to sell the vehicle.  However, you must stay current on payments in order to keep your car from getting repossessed.

    The California Motor Vehicle Exemption

    California has 2 systems of exemptions.  Depending on the circumstances of the case you can use system 1 that allows you to currently exempt $5100 worth of your cars equity, or you can use system 2 that allows you to exempt $2900 worth of equity.

    Also keep in mind that these exemptions cannot be doubled if both spouses are filing for bankruptcy.

    System 1 also allows you to use a wild card exemption.  This is explained below.

    The Wild Card Exemption

    Under System 1 there is also what is called the wildcard exemption.  The Wildcard exemption allows you to exempt up to $26,925 of equity an any piece of property.  Therefore, if your car has $26,925 work of equity, then you can potentially use the entire amount of the exemption on your car to ensure that the trustee does not sell it.

    Federal Motor Vehicle exemption and Federal Wildcard Exemption

    In some cases you will have to use federal exemptions.  In these cases, the federal exemptions also have their own separate motor vehicle and wildcard exemptions.  For people who are not residents of California, but recently moved or are living in California, you should contact their bankruptcy attorney and ask about the Federal Exemptions.  In some cases, you might even be able to use exemptions from the State you are a resident of.

    The numbers provided above change almost annually.  Potentially bankruptcy filers should contact a local bankruptcy lawyer to find out more information on the exemptions.  Additionally, you can read California Code of Civil Procedures Sections 703 and 704 to learn more about California exemptions laws that can be used in Santa Ana, Orange County and Riverside.  Federal exemptions are provided in Chapter 11 of the United States Code Section 522(d).