What is the Florida Vehicle Exemption for Bankruptcy?

Filing for bankruptcy in the Sunshine State brings up a lot of questions, especially about what happens to your car. For most of us, a car is our ticket to work, how we get the kids around, and how we keep our lives moving.

Picture this: You step outside on a typical morning—the sun barely up, a day full of plans ahead—and you freeze. Your car, usually right there in the driveway, ready to ferry you to work and the kids to school, is just… gone. That gut-dropping blend of confusion and dread as you stare at the empty spot, the stress and anxiety of being suddenly immobile, with your day’s plans—and potentially your livelihood—in disarray, can be overwhelming.

But here’s some reassurance: Florida law offers specific protections for residents facing bankruptcy that may help keep your vehicle right where it belongs—with you. Being familiar with these rules can provide significant relief in what is undoubtedly a stressful time.

Let’s walk through what happens to your car when you file bankruptcy, and how Florida law protects your vehicle.

Can Creditors Take Your Car in Florida?

Here in Florida, if your car loan is in good standing and you continue to make payments, your vehicle will generally not be at risk from the creditor of the car loan itself. However, if there are other judgment creditors, they might be able to force the sale of your vehicle if it is not protected by an exemption.

In other words, the rules about whether creditors can take your car in Florida are fairly clear, but they depend on who’s asking for the money.

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If you’re keeping up with your car payments, the lender specifically for your car can’t just repo it or otherwise take it away. You are not in default of the loan agreement specific to that vehicle.

However, if other creditors—those you might owe credit card debts or medical bills to—are chasing you, they might have a challenging time taking your vehicle. For unsecured creditors to seize assets like a car or truck, they must first file a lawsuit, win, and obtain a court judgment against you. This process can be time-consuming and costly for them.

They can only take your car if it’s worth more than a certain amount, and even then, there are ways to protect it.

What Happens to Your Car When You File for Bankruptcy?

The fate of your car in bankruptcy largely depends on the type of bankruptcy you file:

  • Chapter 7 – This is what many people think of when they hear the word “bankruptcy”. Often referred to as liquidation bankruptcy, Chapter 7 might require you to relinquish certain assets, which a trustee could then sell to pay off creditors. But, if your car’s equity is covered by exemptions (I’ll explain this in a bit), you could very well keep your car. Staying current on your car loan and possibly reaffirming that loan can also help you keep the car.
  • Chapter 13 – If you go this route, you’re looking at setting up a repayment plan instead of selling off your assets. In Chapter 13, keeping your car is generally easier provided you keep making payments according to the plan.

Can I Keep My Car If I File Bankruptcy?

Yes, in most cases, you can keep your vehicle if you file for bankruptcy in Florida. The key (no pun intended) is something called the “vehicle exemption.”

Florida lets you exempt up to $1,000 of equity in your vehicle under its vehicle exemption rule. Simply put, if your car’s fair market value minus what you owe on it (the equity) is $1,000 or less, that value can be protected.

And if you don’t own a home or aren’t using the homestead exemption, you might be able to apply an additional $4,000 wildcard exemption towards your vehicle.

Tips for Keeping Your Car

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  1. Reaffirmation Agreements – In Chapter 7, agreeing to continue paying off your car loan as if you hadn’t filed for bankruptcy might let you keep your car. This needs the court’s approval and isn’t always recommended because it keeps you on the hook for the debt, but it’s an option.
  2. Redemption – This allows you to pay the lender the current value of the car in one go, which might be less than what you owe. This is only an option in Chapter 7.
  3. Chapter 13 Cram Downs – If you’ve had your car loan for more than 910 days, you might be able to pay off the current market value of the car, rather than what’s left on the loan, through your repayment plan.

Note: A “cram down” allows a debtor to reduce the principal balance of a loan to the current market value of the asset securing the loan. In the case of a car loan, if you have owned the car for more than 910 days before filing for Chapter 13 bankruptcy, you can propose to pay the lender the current market value of the car instead of the full amount owed on the loan. This can result in significant savings if the car is worth less than the balance remaining on the loan. The difference between the owed amount and the car’s market value would then be treated as unsecured debt, which might be paid off at a reduced rate along with other unsecured debts in the bankruptcy plan.

Bankruptcy doesn’t automatically mean losing your car. Florida’s exemptions are there to help you keep essential assets as you work through financial troubles.

Bankruptcy Attorneys

What Bankruptcy Lawyers Do (Besides Help You Keep Your Car)

Bankruptcy attorneys are skilled professionals who specialize in navigating financial legal challenges. They serve multiple roles: legal expert, strategist, and advisor.

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When you start working with a bankruptcy lawyer, they’re on your side and in your corner. Their primary goal is to guide you through the bankruptcy process effectively. Here are some specific ways they provide assistance when you’re considering filing for bankruptcy:

  • Evaluating Your Situation: They take a close look at your finances to figure out whether bankruptcy is really the best escape route—or if there’s a better way to clean up the situation.
  • Choosing the Right Path: They help you decide whether to go for Chapter 7 or Chapter 13 bankruptcy, or in some cases, Chapter 11 if you’re running a business that’s hit a rough patch.
  • Handling the Paperwork: The paperwork for filing bankruptcy in Florida can be a nightmare. Your attorney can handle forms and paperwork filings, making sure everything is spot-on and submitted on time.
  • Stopping the Calls: They can assist in getting creditors off your back—making sure no one crosses the line while your bankruptcy is being processed.
  • Court Representation: They can stand up for you in court, dealing with creditors and trustees so you don’t have to.

Florida Bankruptcy Attorneys

Bankruptcy lawyers in Florida need to have their game face on—not only do they need to know the federal rules, but they’ve also got to navigate the quirks of Florida law.  They’re especially good at leveraging Florida-specific exemptions that might save your home, your car, or a chunk of your personal belongings.

Example Scenarios

To better understand how bankruptcy attorneys can assist Floridians, consider the following hypothetical scenarios:

Meet Sarah

Sarah’s a freelance graphic designer from Winter Park. She’s creative, she’s talented, but she’s drowning in medical bills from an unexpected surgery.To make matters worse, her trusty Altima, essential for client meetings and material pick-ups, is also nearing the end of its life, adding to her financial worries.

A bankruptcy attorney in Winter Park might steer Sarah towards Chapter 7, wiping out those medical debts because her assets are pretty minimal. They’d walk her through each step, ensuring she understands how this will reset her finances and affect her credit—including the possibility of keeping her Nissan under Florida’s vehicle exemption rules.

Meet Carlos

Carlos owns a restaurant in Kissimmee that’s been hit hard by a drop in tourism. Debts are mounting, and he’s staring down the barrel of shutting down. His Metris van, critical for expanding his service to include deliveries during this downturn, is also under threat of repossession.

Here, a bankruptcy lawyer might recommend Chapter 11. They’d help Carlos reorganize his debts, possibly keep the restaurant open, and negotiate manageable payments with creditors. This restructuring could include making plans to retain the delivery van, turning a potential closing into a fresh start.

Meet Linda & Tom

This retired couple is facing foreclosure. They missed some mortgage payments on their house in Altamonte Springs after a series of unplanned retirement expenses strained their budget. Their home, just a few blocks from Cranes Roost Park with the small, meticulous garden they’re so proud of, could slip through their fingers without some quick action. They’re also worried about losing their Honda CR-V, which they rely on for doctor visits and grocery shopping.

A bankruptcy lawyer would help them decide if filing for Chapter 13 would be their best move. They could draft a repayment plan to catch up on their mortgage, save their home, and consolidate other debts to more manageable levels.

Hiring Florida Bankruptcy Attorneys

If you’re thinking about bankruptcy and are worried about your car, it’s a good idea to talk things over with an attorney who knows the ins and outs of federal and Florida bankruptcy law. They’re not just there for the heavy lifting with paperwork and court appearances; they’re your advocates in the legal system, guiding you through each decision and strategizing the best way forward.

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Above all, consulting with a qualified bankruptcy lawyer can help you understand your options and make the right choices for your situation.

Remember, bankruptcy isn’t the end of the road—it’s more like a detour on the way to a more secure financial future. With the guidance of a skilled attorney who knows the ins and outs of Florida law, those facing financial distress can navigate their situation with a bit more confidence and a lot less stress.

So, if you’re feeling overwhelmed and unsure about what next month might hold, maybe it’s time to chat with a qualified Florida bankruptcy attorney who can help clear the path ahead. Here’s to making informed choices—and driving towards a brighter horizon.

The Independence Law Firm (Winter Park, FL)

Looking for legal guidance in Florida or Georgia? Meet Attorney Brian Miller, the founding partner of The Independence Law Firm. A graduate of Mercer Law School and holding an LLM in Taxation from the University of Florida Levin College of Law, Brian brings a wealth of expertise, especially in taxation and complex legal matters. Licensed to practice across all northern, middle, and southern districts of Florida, he is equipped to handle a wide range of legal challenges.

At The Independence Law Firm, Brian leads a team dedicated to integrity, compassion, and professionalism. Whether you need assistance with bankruptcy, family law, estate planning, or debt settlement, Brian and his team are committed to delivering exceptional legal services and achieving the best outcomes for their clients.

Don’t navigate bankruptcy or other legal matters alone. Contact The Independence Law Firm of Winter Park, Florida and let our dedication and expert legal guidance work for you.

Give us a call at (813) 642-4851 or click here to book an in-person or Zoom meeting.

Disclaimer: The information presented in this article and across this website is presented for general educational purposes only. Although this article discusses legal issues, it is not legal advice. Please be aware that laws and the content of any linked websites or pages might have evolved since the publication of this article, and as such, we cannot guarantee the ongoing accuracy of any presented information. Utilizing this article does not establish an attorney-client relationship.