Nevada Car Exemption in Bankruptcy
Can you keep your car and file for bankruptcy in Nevada? Issues with automobiles are among the most frequently faced by debtors in bankruptcy. After all, what good is debt relief if you are left with no transportation to get to work? Nevada bankruptcy laws allow for a fairly generous $15,000 exemption for your car (the exemption for cars altered to accomodate a disability is unlimited). This means that if you are considering filing bankruptcy in Nevada, you can keep your car if you have $15,000 or less in equity. It is important to note that bankruptcy exemptions do not apply based on property value, they apply to equity in property. Equity in a car can be calculated by subtracting the balance of any car loan from the blue book value of the car. In Nevada, if your car equity is $15,000 or less, you can file bankruptcy and keep your car.
For example, if Joe from Las Vegas is considering filing bankruptcy because of credit card debt that has spiralled out of control, he can keep a car worth $25,000 that has an outstanding loan balance of $15,000. In this example, Joe’s $10,000 of equity in his car is protected by Nevada bankruptcy laws. The trustee cannot sell Joe’s car to access his $10,000 of equity since Nevada bankruptcy laws allow debtors to protect up to $15,000 of equity.
There is a catch….
Equity is not the only inquiry when evaluating whether you can keep a car through the bankruptcy process in Nevada. In most jurisdictions, Nevada being no exception, debtors are required to reaffirm their car loan if they wish to keep the car. A reaffirmation agreement will not be approved by the Bankruptcy Court if the debtor is unable to afford payments. Discuss the matter with a qualified bankruptcy attorney, but understand that in order to keep your car, you will need $15,000 or less in equity AND be able to demonstrate that you can afford payments going forward.
Ties and close calls to the debtor?
Lastly, keep in mind that the $15,000 car exemption in Nevada is not a bright line rule. If you have $15,500 of equity in your car, it is likely not worth the trustee’s time to sell your car to go after $500. Even if you have a substantial amount of non-exempt equity, it is often possible to make a cash payment to the trustee in lieu of a sale.