Here in Utah, we can protect $3,000 of the equity in your car or truck when you file bankruptcy. In a chapter 13, if your car has more equity than I can protect, then you’ll need to pay that to your creditors. In a chapter 7, If you have more than $3,000 of equity, then you’ll either need to pay that amount to the trustee over the three to six months that your case is open. If you can’t “buy back” that equity from the trustee, then you’ll have to give it to his auctioneer so that he can sell it. He’ll pay you your $3,000 from the sale proceeds and use the rest to pay your creditors.
As for valuation, there are a lot of factors he’ll look at. He may use NADA or Kelley Blue Book, he may order you to take it to the auctioneer for appraisal, or he may accept our testimony on the bankruptcy schedules if we’re detailed enough.
So, let’s say your car needs some work. We can list that in the bankruptcy schedules to devalue it in the eyes of the trustee. He may want to see a picture of body damage. He may want to see an estimate from an auto repair shop. For instance, pictured here is my 2000 Honda Odyssey. KBB value of $2295. But, it needs work. If I list it as:
2000 Honda Odyssey (needs work) ….. $1,500
the trustee will have follow-up questions.
But if I list is as:
2000 Honda Odyssey (will not pass emissions, needs EGR valve replacement and flush EGR system = $800 in repairs) …. $1,500
then the trustee most likely won’t ask for a written estimate or want to take it to an auctioneer because the details were that good.
That’s one of the reasons you really need to use an attorney to file your bankruptcy: the details make all the difference in your bankruptcy schedules.