Will I lose my car in bankruptcy?

The answer to that depends on if you pick the Massachusetts or Federal exemptions.

Massachusetts allows you to keep up to $700 in a car’s equity (value). Let’s say you own a car that’s worth $5000 and you owe $4300 on it, then technically the Trustee will have no incentive to take your vehicle away from you because if he were to sell the vehicle, then nothing would be left over to pay the creditors ($4300 would go to the loan creditors and $700 to you because that ‘s the amount of equity you’re allowed to keep).

If your car is worth $20,000 and you owe $9,000 on it, then the trustee would want to sell your car, realize a $10,300 gain ($11,000 minus $700 of equity Massachusetts allows you to keep) and distribute the balance to creditors.

On the other hand, if you choose the more generous Federal exemptions, then you can keep up to $3225 in your car’s equity, up to $1350 in jewelry and an additional $10,125.00 of “wildcard” exemption. Wildcard exemption is the amount the Federal government allows you to use up to if you want to keep certain property and the exemptions on those properties are not enough to cover the property . Let’s say you have jewelry worth $4,700 and a car worth $10,000 with no loans secured on them. Without the wildcard exemption you’d only be allowed to keep up to $1350.00 in jewelry and $3225.00 of equity for your car which means that $6775 of the car’s equity may be reached by the Trustee to distribute to creditors. However, the wildcard allows you to cover this deficiency by using up $6775 of the $10,125 toward the car and the $3350 of the balance to cover the jewelry deficiency.

Massachusetts has no wildcard exemptions.