Can I Keep My Car If I File for Bankruptcy in Florida? Carla’s Story

Carla just bought a new, shiny car that she absolutely loves. But lately, Carla has been struggling with other debts. Bills are piling up, and she's thinking about filing for bankruptcy to get a fresh start. But one big question is on her mind: "If I file for bankruptcy, can I keep my car?" The good news is that in Florida, whether Carla can keep her car depends on a few important details.

Understanding Bankruptcy Options

Carla has two main options when it comes to bankruptcy:

  • 1. Chapter 7 Bankruptcy: This is often called "liquidation bankruptcy." It can wipe out many of Carla's debts, but she might have to give up some of her property or re-purchase it from the bankruptcy estate. o Florida allows Carla to protect up to $5,000 in equity in a single motor vehicle. If she doesn't own a home, she can use a $4,000 wildcard exemption in addition to her motor vehicle exemption. o If Carla still has a car loan, she can choose to keep making payments. This is called a "reaffirmation agreement", and it allows her to keep the car and continue making monthly payments. This process helps her rebuild her credit after the bankruptcy.
  • Chapter 13 Bankruptcy: This is a repayment plan that lasts 3-5 years. Carla can keep her car as long as she includes the car loan and keeps up with payments.

What If Carla Is Behind on Car Payments?

If Carla has fallen behind on her car payments, Chapter 13 can help her catch up those missed payments over time. Chapter 7, on the other hand, might not protect her car from being repossessed if she's behind on payments.

Equity in the Car Matters

Equity is the car's value minus what Carla still owes on it. If Carla's car is worth $20,000 and she owes $18,000, her equity is $2,000. Florida's exemptions help protect that equity. If Carla's equity is more than her allowed exemption(s), the bankruptcy trustee normally wants to make a deal with her or if she was unwilling to make a deal, the trustee could sell the car to pay creditors—but Carla would get the allowed exempt amount back.

Final Thoughts for Carla

Carla's love for her car doesn't have to stop her from filing for bankruptcy. With the right plan—either by using exemptions in Chapter 7 or setting up a repayment plan in Chapter 13—she may be able to keep driving her beloved car. If you're like Carla and wondering what bankruptcy means for your car, reach out to The Dellutri Law Group. We're here to guide you every step of the way toward financial freedom!