I sold my car to my parents years ago, but they never registered it with the DMV. What happens in bankruptcy?

It’s still your car.  If you didn’t exempt it (protect it with your one bankruptcy car exemption), then the bankruptcy trustee will take it and sell it.

I had a client recently who had a fairly boring, simple chapter 7.  Months went by, and the trustee didn’t close out the case.  Out of the blue, the trustee noticed up a 2004 exam (deposition).  We went to the deposition, and the trustee asked my client why she was hiding a car in a storage unit.

She told the trustee that it was her mother’s car that she had sold to her mom years ago.  Mom couldn’t drive, so she was storing the car for her mother.  We even offered to show the trustee a bill of sale that Mom signed years ago.  Unfortunately, Mom never went to DMV and actually registered the car in her name.  Even worse, she never had the title transferred to her name.

This means that when the bk trustee ran a vehicle title search, it showed the car as still titled in my client’s name.

The trustee would not accept the old title/bill of sale dated years ago.  The bk trustee has dealt with too many dishonest debtors who would back date a bill of sale, and she wouldn’t give us the benefit of the doubt.  We were given the choice of losing the vehicle to an auction or purchasing its value back from the trustee.