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Will my car get taken if I file for Bankruptcy, is the most frequent question we get about bankruptcy. It is pretty understandable, if your car gets taken how will you get to work, how will you drop the kids off at school? The answer to, will you keep your car, is I'm afraid one of those lawyers’ answers, "it depends".
The first point to that it's not just a car. Bankruptcy law deals with VEHICLES, which refers to any kind of transport that is your primary means of getting around. It could be a car, a motorcycle, a scooter, theoretically, it could even be a boat or a bicycle. There is no kind of exemptions for caravans or motorhomes. These can be sold in bankruptcy if there is any equity in them.
The Bankruptcy act allows you to keep a vehicle up to a wholesale value of $8,150. This is the value if you owned the vehicle outright, i.e., nothing is owing on it. If you look on Redbook or a similar car valuation site. Look at the wholesale value of the vehicle and this should give you an indication of what your vehicle is worth. Let's work through some examples.
Example 1: You've got a 2010 Toyota Camry. Redbook puts the trade-in value of this car at $5,700 so you would be able to keep it, no problem.
Example 2: You own a 2010 Porsche 911. Redbook puts the trade-in value of this car at $100,800. The trustee would sell this car and give you $8,150 to buy a new car.
If you have a car loan on your vehicle the threshold only applies to the equity in your car.
Example 3: you've got a 2020 Toyota Hilux; Red Book puts the value at $50,000 and you owe $40,000 on the Hilux. Therefore, there is $10,000 worth of equity in the car. The trustee will sell your car and give you $8,150.
Example 4: You have a 2020 Toyota Prius. Red Book puts the value of this car at $20,000. You owe $12,000. There is $8,000 in equity. The trustee will not sell the Prius and you will be able to keep your car.
In summary, most people can keep their car in Bankruptcy, but it does depend on the situation as outlined above.
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