How to Sell a Vehicle While in Bankruptcy

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Do not sell any asset without the bankruptcy court's permission.

When a person files bankruptcy, he is allowing his attorney and the court to negotiate liquidation of his assets and repayment of his debts. If the debtor wants to sell an asset during bankruptcy, such as a car, then the debtor must receive the court's permission. If the debtor fails to ask the court's permission, then the proceeds from the sale may be confiscated by the bankruptcy trustee and used to repay the debtor's creditors. What's worse, the court may decide to dismiss the case -- eliminating the debtor's protection from creditors -- and charge the debtor with fraud.

Things You'll Need

  • Attorney
  • Car identification information
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    • 1

      Speak with your bankruptcy attorney. The attorney will file a motion with the court asking for permission to sell the car. If there is a loan against the car, you may be forced to use the proceeds to repay the debt, or if the car was identified as exempt property in the petition, you may be allowed to keep the proceeds; it's up to the court.

    • 2

      Get the court's permission through the bankruptcy trustee. The trustee will "abandon" the car, which allows the debtor to sell the asset. The debtor will be responsible for finding a buyer.

    • 3

      Sell the car and give the proceeds to the bankruptcy trustee. By law, you are required to get the highest possible value for the car. The trustee will use the proceeds to pay for the sale and administrative costs, as well as any loans that are against it. Your claimed exemption gets paid last.

Tips & Warnings

  • While debtors may file for bankruptcy themselves, it's inadvisable. Using a bankruptcy attorney who will review case specifics helps ensure appropriate advice.

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