Great! The Bankruptcy Trustee Abandoned Your Car

When you file for bankruptcy, whether Chapter 7 or Chapter 13, approximately thirty days later, you will attend the 341 meeting of creditors. At that creditors meeting, the trustee will ask questions about your car. While it is the same standard set of questions for most debtors, what is more important is what the trustee will do with your vehicle.

Updated on February 18, 2025.

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Keep reading to learn what it means when the trustee abandons your vehicle.

Key Points:

• The 341 Meeting of creditors is conducted by the bankruptcy trustee.
• The bankruptcy trustee for Chapter 7 bankruptcy cases is not the same trustee that handles Chapter 13 bankruptcy cases.
• What happens on your car depends if there is equity, negative equity, or if it is exempt.

The Bankruptcy Trustee

When the bankruptcy petition is filed, a trustee is assigned. The trustee’s role in the bankruptcy process is to protect the bankruptcy estate. The bankruptcy estate is considered all assets that you own, whether those assets are protected or not.

At the 341 meeting of creditors, the bankruptcy trustee will ask general questions about your bankruptcy petition and will also ask questions about any secured assets, such as your car. What happens with your car next depends on the case’s specific facts.

• Here’s What You Need to Know About the 341 Meeting of Creditors

Chapter 7 Versus Chapter 13 Bankruptcy

While Chapter 7 bankruptcy is known as a liquidation, you won’t lose everything because of exemptions. Exemptions protect assets. Cars are usually protected because car values depreciate quickly.

• What is the Chapter 7 Liquidation Test?

When a Chapter 7 bankruptcy petition is filed, you must be up to date on your car payments; otherwise, you risk losing your car. Chapter 7 bankruptcy will only protect secured assets such as a car if you are caught up on the payments. If not, and you want to keep your car, then Chapter 13 bankruptcy should be filed.

• Steps in a Chapter 13 Bankruptcy

With Chapter 13 bankruptcy, late payments can be spread out throughout the plan that lasts between three to five years This will give you more breathing room to help you catch up with the payments.

Negative Equity Versus Equity

If your car has equity, the difference between the value of your vehicle versus what it is owed, you have to ensure that the equity is exempt or protected. Exemptions vary per state, so always research the amount of equity protected in your state.

If your car has negative equity, that means more is owed on the vehicle than it is worth. This is common in most situations where a minimal down payment was used to purchase the car or you are still a couple of years into the loan.

For example, if your car has a value of $10,000, but the outstanding car loan is $15,000, there is $5,000 negative equity or no equity in your vehicle.

The Trustee Abandons Your Car

Hearing that the trustee abandoned your vehicle sounds negative, but it is a good thing when it comes to bankruptcy.

At the 341 meeting of creditors, that trustee will ask if you are up to date on your car loan. The trustee will also ask if you wish to keep your car.

Suppose you say yes to both questions, and there is no equity in the car or insufficient equity for the trustee to pursue an interest in your vehicle. In that case, the trustee will state that they abandoned their interest in the car.

By the trustee stating they will abandon their interest in your car on behalf of the bankruptcy estate means they are not interested in your car. As long as you continue making timely car payments, there will be no issue with your vehicle or bankruptcy case.

Do you have a question regarding your vehicle and the bankruptcy process? If so, feel free to send me an e-mail, and if your question is chosen, it will be posted in the reader’s question forum.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

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Please note the information on this site does not constitute legal advice and should be considered for informational purposes only.