To make property exempt, the bankruptcy filer must make sure to claim the desired items as exempt in the filing forms and properly identify each item and its value. There are limits to exemptions and allowable exemptions are specific to item types that can be considered day to day necessities such as clothing, transportation, housing, trade tools, pension, earnings, and household items.
Denver Bankruptcy FAQ:
Keeping Your Car
Car loans & bankruptcy information
If you are filing a Chapter 7, you cannot sell any of your nonexempt processions. If you sell any exempt property, including a car, the trustee may order that the money made be used to repay creditors. In general, selling a car before a Chapter 7 bankruptcy is discharged is not advisable. In the case of a Chapter 13 filing, up to the entire amount of money made from the sale of the car may be required to be paid to creditors in some cases, in others the proceeds can be applied to the purchase of a new automobile if circumstances warrant the sell and purchase of automobiles.
In a Chapter 7 bankruptcy filed in Colorado, each individual is allowed to claim up to $5000 automobiles as exempt, if a couple files jointly, they have a $10,000 car exemption. This exemption takes into account the equity in the car, the difference between its value and the amount of debt still owed on the car and is not based on its original cost.
Although most types of bankruptcy allow an individual the chance to hold onto at least one car, Chapter 13 bankruptcies are most commonly thought of as the bankruptcy option best suited to protecting property. A Chapter 13 Bankruptcy is a credit payment plan and does not commonly involve the sale of possessions so Chapter 13 bankruptcies often offer individuals the best chance to hold on to their vehicles.