If you are thinking about filing for Chapter 7 bankruptcy in Maryland and own your car outright, you might be asking yourself whether you will be able to keep it. The answer depends on a few important factors, including how much your vehicle is worth and what legal exemptions are available in your case. For residents of Baltimore and Dundalk, understanding these rules can make a major difference in your outcome.
Whether or not you can keep your car when you file depends on three main factors:
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Whether your car is financed or you own it outright
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What exemptions you use in your bankruptcy case
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The type of bankruptcy you file
Answering the Question: What Happens to My Paid Off Car in a Chapter 7 Bankruptcy Filing?
How to Keep a Paid-Off Car in Chapter 7 Bankruptcy
If you own your car outright, there’s a good chance you’ll be able to keep it when you file for Chapter 7 bankruptcy. The key is whether your car’s value is protected by the motor vehicle exemption you choose. Here are the three steps to figuring out if your paid-off car is safe in Chapter 7.
Step 1: Find Your Car’s Fair Market Value
Your car’s fair market value is the amount it would sell for today, based on factors like mileage, condition, year, and location. This is not the same as what you originally paid or what you believe it is worth.
You can estimate the fair market value by visiting websites like Kelley Blue Book or Edmunds and entering your car’s details.
Step 2: Compare That Value to Your Available Exemption
Maryland does not allow you to use the federal bankruptcy exemptions, but it offers its own version of the motor vehicle exemption. In Maryland, you may be able to protect up to $6,000 in personal property under what’s called the “wildcard” exemption. This can be applied to your vehicle if it’s paid off.
If the fair market value of your car is less than or equal to the exemption amount, you will be able to keep your car.
Example:
If your car is worth $4,800 and you apply Maryland’s personal property exemption to it, your car is fully protected and will not be taken by the bankruptcy trustee.
Step 3: Use a Wildcard Exemption if Needed
Let’s say your car’s value is slightly more than the amount you can cover under Maryland’s motor vehicle exemption. You might still be able to keep it by using your remaining wildcard exemption to cover the extra value.
Example:
If your car is worth $7,200 and you use $6,000 from Maryland’s personal property exemption, you might be able to apply another exemption—like tools of the trade or household goods—to make up the difference and fully protect your vehicle.
What Happens If Your Car Isn’t Fully Protected?
If your car’s value is more than your available exemptions and no additional protections apply, the bankruptcy trustee might decide to sell it. In that case, you would receive the portion of the value you were allowed to exempt in cash, and the remaining proceeds would go toward paying your creditors.
That said, it is uncommon for paid-off vehicles to be sold in Chapter 7—especially if the car is older, has high mileage, or has depreciated significantly in value. In most Maryland bankruptcy cases, clients are able to retain their vehicles without issue.
Ready to Meet with a Baltimore Bankruptcy Attorney?
If you are filing for Chapter 7 bankruptcy in Baltimore or Dundalk and are concerned about keeping your car, it’s time to speak with an experienced attorney. At The Law Offices of Nicholas J. Del Pizzo, we help Maryland residents navigate the bankruptcy process with clarity and confidence. We’ll review your car’s value, determine what exemptions apply, and create a strategy that protects the assets most important to you.
Don’t take chances with your financial future or your transportation. Contact The Law Offices of Nicholas J. Del Pizzo today to schedule your free consultation and get the answers you need to move forward with peace of mind.