How to Value an Automobile in Bankruptcy
When you file for bankruptcy, your assets, which are known collectively as your bankruptcy estate, are put into the hands of a court-appointed trustee. The trustee is an impartial third party who oversees the liquidation (selling) of your non-exempt assets. Bankruptcy laws are designed to allow you to keep certain exemptible assets as determined by state and federal laws, including your car. It is important to know how to value an automobile in bankruptcy, since the federal Bankruptcy Code allows exemptions for automobiles based on the owner's equity in, and the market value of the vehicle.
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Instructions
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Consult one of the national online vehicle valuation websites like the National Automobile Dealers Association (NADA) or Kelly Blue Book. Some U.S. bankruptcy courts may only recognize the NADA values, but each district varies, and an experienced bankruptcy attorney should know which car valuation guide is used by local bankruptcy courts and trustees.
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Provide relevant information about your vehicle as directed by either website's prompts. You need to access the used car prices to complete the questionnaire. Have the necessary information available before beginning, such as your vehicle's year, make, model, total mileage, overall condition and any optional or enhanced features of the car.
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Print the final page, which will outline the estimated market value of your vehicle. NADA will provide you with three different categories of trade-in values (rough, average, clean) and a "clean" (clean vehicle history report) retail price. Kelly Blue Book offers values for trade-in, private party and retail. The laws pertaining to Chapter 7 bankruptcies now require you to assume the retail value.
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Visit a reputable local mechanic or car dealership to get an estimate for any necessary work or repairs for your vehicle. Subtract the estimate amount from the NADA or Kelly Blue Book value of your car to arrive at the current market value. The court-appointed trustee will also value the automobile in your bankruptcy case to verify its fairness.
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Calculate your equity in the vehicle by subtracting any amount you still owe on the vehicle from the actual current market value (value minus any necessary repairs). The Bankruptcy Code allows an exemption value of $3,225 for automobiles. If your equity is more than $3,225, you may have the option of paying the amount above the exemption (unprotected equity) to the bankruptcy trustee to keep your vehicle.
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Tips & Warnings
If you own a vintage vehicle free and clear that is worth several thousand dollars, the bankruptcy trustee will probably take possession of the vehicle and sell it to pay your creditors.
If you expect to keep your car after filing bankruptcy, you should be prepared to continue making payments if you still owe money on the vehicle. If you will not be able to make the payments you can forfeit the vehicle to the lender.
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