Valuing your car correctly can make a big difference in bankruptcy.
Valuing your car, van, truck, motorcycle or other vehicle is an important part of a bankruptcy case; when you file for bankruptcy, you must include a list of everything you own and how much each item is worth. If you have a car, using the right valuation method could mean the difference between your keeping the vehicle or losing it to the trustee.
The Standard for Valuing Property in Bankruptcy
There are several different standards for valuing a car in bankruptcy, and which standard applies to you depends on the law in your bankruptcy district or your federal circuit.
Retail replacement value. The most common standard for valuing a car in bankruptcy is the retail replacement value. The retail replacement value is what you would pay for a similar vehicle in a similar condition in the current market, as of the date you file your bankruptcy case.
Other valuation methods. Your bankruptcy district or circuit may use a different standard, however, so make sure to find out the standard in your area. Other valuation methods include the private party value, which is the price you would pay if you purchased the vehicle from a private party and not a dealership, and trade-in value, which is the value a dealer would apply if you turned in the car to buy a new vehicle.
Methods for Valuing a Car in Bankruptcy
Whatever the standard, there are a few ways you can find the value of your car for your bankruptcy paperwork. These include:
Sale Price. You can look online and in newspapers to see what cars of your make, model, and age are selling for. This valuation method is more of an "educated guess," but it is sufficient in most situations.
Blue Book Value. "Blue book value" is a method based on using trade publications such as the Kelley Blue Book, the Black Book, or the NADA Valuation Guide. These publications are updated regularly and allow you to find the retail value, the trade-in value and the private party value based on your vehicle's make, model, model year, and condition. You will need to know your car's year, make and model, as well as have a reasonable assessment of whether its condition is Excellent, Good, Fair, or Poor and whether it has any modifications that may alter the value. For example, if you have a 2007 Nissan Altima, do you have an Altima S, or an Altima SE? One is worth more than the other.
A Formal Appraisal. You can hire a professional to inspect your car, note its condition, and appraise the value based on the condition, make, model and year, as well as market conditions. Appraisals are the most reliable method for valuing your car, but they are expensive and take up time, and they are generally only useful if the car's value is contested or if you are in a situation where the car's value is of great importance, such as a vehicle redemption or a cramdown.
Which Car Valuation Method to Choose
The method you choose will depend on multiple factors. If the value is easily apparent, you can use a more lax method of valuation. For example, if you just bought your car, it is likely worth the same or less than what you owe on it, making the valuation less important -- the trustee will only take and sell a car that has equity. If you own your car outright but it is very old (not classic) and likely worth less than your exemption, your value can be more of an educated guess based on limited research.
However, if you own a car with some value and you owe little or nothing on it, an exact value becomes more important. Similarly, if you have a car loan that you can cram down in a Chapter 13 bankruptcy, the creditor you owe for the car will fight for a higher value so it can get paid more. In this situation, you will need a precise valuation with supporting documents. Using the blue book value is a starting point, but an appraisal may be in order. (To learn more, see Your Car in Chapter 13 Bankruptcy.)
Another case where an appraisal may be helpful is if you're in a Chapter 7 case and intend to redeem your vehicle, which means pay a lump sum in the amount of the car's value to remove the lien and own the car free and clear. In that case, the creditor you owe for the car will want a precise value. (To learn more about redemption, see the articles in Your Car in Chapter 7 Bankruptcy.)
To learn how to value your home or personal property in bankruptcy, see Completing the Bankruptcy Forms.
FAQs
The most common standard for valuing a car in bankruptcy is the retail replacement value. The retail replacement value is what you would pay for a similar vehicle in a similar condition in the current market, as of the date you file your bankruptcy case.
How do you determine the value of your vehicle? ›
Determining how much your car is worth depends on multiple factors, such as its age, mileage, features and condition. Valuation guides like Kelley Blue Book and Edmunds can provide a car value estimate, helping you negotiate a more favorable sale price with a dealer or private buyer.
How do you redeem a vehicle in Chapter 7? ›
If you wish to redeem your vehicle in a Chapter 7 bankruptcy then you need to apply for a 722 redemption loan. Generally the interest may be higher due to the risk involved for the lender. Once your have received a 722 redemption loan and are in a Chapter 7 bankruptcy, a motion will be filed to redeem the vehicle.
Can you lower your car payment with bankruptcy? ›
Redeem the car loan with a new lender
Bankruptcy law permits a car owner to reduce the current car balance to the car's fair market value. For example, if you owe $15,000 and the car is worth only $10,000, you may be eligible to reduce the car balance by $5,000 with a post-bankruptcy loan.
How does bankruptcy work with vehicles? ›
If your equity is less than the exemption, you might be able to keep your vehicle and continue to pay down your loan. If your equity is higher, your bankruptcy trustee may have to sell your vehicle and offer you a lower sum of money in exchange to help you purchase a vehicle with equity inside the exemption limits.
What is the best website to get the value of your car? ›
The Kelley Blue Book ® Price Advisor shows you what you should pay for a new or used car based on what others have paid in your area.
What is the best website to determine the value of a used car? ›
For over 90 years, Kelley Blue Book has been The Trusted Resource for used car values, helping car owners understand what their used car is worth. Depending on the method of disposal, there actually may be more than one Blue Book Value for the consumer's car, truck or SUV.
How is car value determined in Chapter 7? ›
The most common standard for valuing a car in bankruptcy is the retail replacement value. The retail replacement value is what you would pay for a similar vehicle in a similar condition in the current market, as of the date you file your bankruptcy case.
What happens to my car loan after Chapter 7? ›
A reaffirmation agreement allows you to modify the terms of your loan to make repayment easier during and after Chapter 7 bankruptcy. A car loan will allow you to keep your vehicle as long as you make payments according to the terms in the reaffirmation agreement.
What happens to car payment in Chapter 7? ›
"Reaffirm" Your Car Loan in Chapter 7 Bankruptcy
Some lenders will allow you to keep the car without doing anything other than staying current on your payment. The lender will transfer the vehicle title to you once you pay it off.
What Happens If I Don't Reaffirm My Car Loan? Without a payment contract, the lender could repossess the car at any time, even if you continued making monthly amounts and remained current. Also, you wouldn't benefit from timely payments because the lender wouldn't report payments to credit bureaus.
Can you refinance a car during bankruptcy? ›
You may buy or refinance a car loan even during Chapter 13 bankruptcy if you have an acceptable reason to do so. Most importantly, consult a bankruptcy attorney to help you better understand the process and get your car loan approved.
Can I refinance my car before bankruptcy? ›
There are a few issues that you need to discuss with a bankruptcy attorney before trying to refinance your car loan. You need to review whether a new loan right before bankruptcy will create problems of “good faith” in your case. Getting more debt, or a new debt, right before filing can create problems.
How soon can you buy a car after filing Chapter 7? ›
Getting a Car after Chapter 7
You should receive notice of your discharge roughly 90 days after your 341 meeting of creditors. After you get this notice, you can get a loan for a car. However, it's still better to wait so you can improve your chances of being approved for a loan with better rates.
What if my car was never repossessed after Chapter 7? ›
What Should I Do If My Car Was Never Repossessed After Bankruptcy? If the bank refuses to repossess the car after you give the lender the proper notice of your wish to surrender the vehicle and make the car available, you'll likely be able to keep it.
How many cars can you keep in chapter 13? ›
You can keep two cars in Chapter 13 bankruptcy, but you'll need to be prepared to show that you can pay creditors for any vehicle equity that isn't covered by a bankruptcy exemption.
How accurate is Kelly Blue Book? ›
The accuracy of KBB values can vary depending on several factors, such as the condition of the vehicle, its location, and the current market demand for that particular make and model. KBB values are based on a number of factors, such as the car's make, model, year, mileage, condition, and features.
How to calculate car value based on mileage? ›
How to Calculate Car Value Based on Mileage. According to most experts, your estimated car value will depreciate by an average of $0.08 for every mile on a vehicle's odometer. Furthermore, a vehicle value calculator will usually dock 10% off your new car's value just for driving it off the lot.
When determining the value of a used car? ›
Factors Influencing the Value of a Used Car
These include the original retail price of the vehicle-what it was worth on the showroom store-its age, its current condition, what trim level and options packages it has, the mileage on the odometer, and even the general area where it's being sold.
How do you determine the salvage value of a vehicle? ›
Find what percent of market value your insurance company uses to determine salvage value. The percentage can vary, but it's usually around 75% of market value. Subtract that percentage as a decimal from 1.0. For example, if a 75% loss of market value is considered salvage, 1.00 - .
