not using a lawyer
The exemption is the car, not the debt and only to the extent you have equity in the car - value minus debt equals equity. If there is negative equity, there is nothing to exempt.
First, you have to list ALL assets that you own, which will include the car(s) and any and all other personal property and real property. Then, for the assets you wish to protect you must apply exemptions to "cover" the value of the property. Value is based on current value of the asset, and reduced by any lien/loan owed on that asset. You are not protecting the debt, you are protecting the asset.
Also, ALL debts must be listed in your bankruptcy case and you cannot simply "choose" to leave off one creditor or another because you have decided that you want to pick-and-choose which credit you will keep and which credit you will include in your bankruptcy case. ALL debt with a balance owing at the time of filing must be included in your case.
Second, maybe consider using a lawyer. Not only will a competent bankruptcy lawyer save you the stress of trying to figure out a complex area of law - don't be fooled, bankruptcy law is NOT of the "simple and easy" variety, especially when secured assets are at stake - a lawyer will also know how to prepare your case and protect your assets, represent you during the 341a hearing, and communicate with the trustee, the court, and any creditors as needed.
Naturally, money is often an issue and determining how to finance lawyer fees and filing fee may be a challenge. As a bankruptcy-only law firm, we understand these challenges and we help clients cut costs through limited-scope representation, payment plans, and reducing fees where possible.
If you would like more information on bankruptcy, please visit: www.salanicklaw.com
Best of luck!
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The question suggests that not using a lawyer is not such a good idea. If you are filing bankruptcy, you should be getting a serious benefit in discharging a lot of debt. So paying a few grand to an attorney is money very well spent.
That said, here's my answer. Exemptions are for assets. If you have assets that can't be exempted, they are subject to the trustee taking them to pay creditors. So it's not a question of "having" to give a car an exemption, it's a matter of whether the car has equity value after paying off the secured loan. For instance, if you owe $10,000 and the car is worth $12,000 (on today's market -- see kbb.com or edmunds.com for a valuation), the car represents a $2,000 asset. You can exempt that with the motor vehicle exemption in California or the wildcar if you've already used that exemption.
If the equity is more - say $7,000 - then you use the motor vehicle exemption and then apply the rest of the equity to the wildcard exemption.
The Nolo book is very helpful. But I guarantee you will have a lot of trouble with your bankruptcy. Consider seeing an attorney.
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You list the vehicle and the debt that is on it. Then you exempt it. It may not be that there is any equity after the debt but if you want to keep it you should exempt it. Of course you also have the issue of having to reaffirm the debt to keep the vehicle. That requires either an attorney representing you to sign off or you need to file a motion and get the judge to sign off. If handled right and depending on which lender you have it may be possible to renegotiate the terms of the loan such as the interest rate. However, it is hard for an attorney and almost impossible for an individual pro se. You can go to the court and find out when the different judges handle reaffirmation motions and watch a calendar. How each judge handles reaffirmations is different and you will not know who your judge is until after you file.
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All assets and all liabilities must be listed. If the debt/loan exceeds the value of the car, then there is no equity. However, if the value of the car is higher than the existing debt/loan against the car, then the vehicle has equity. In this case, you would use an exemption to protect the asset.
Chapter 7 Bankruptcy Attorney
Bankruptcy code requires all debtors to diligently and honestly disclose all of their assets, liabilities, and sources of income. One may be denied the discharge (forgiveness of the debt) for failure to disclose. Consequently, you will need to disclose secured assets/debts on the appropriate schedules (A,B, D) and when applicable and available protect or exempt the property. The exemption amounts and law differs from each state and sometimes federal exemptions are available and can be used. The choice of law also depends on the nature, type, and amount of the fair market value of each asset. For a secured asset only the equity in the property may need to be exempted. The determination of equity is as follows:
Fair market value of the property minus amount of obligation/debt= the balance is equity and must be protected.