Whether the Chapter 7 trustee can take your car depends entirely on equity and exemptions.
The Equity Calculation
Equity = Fair Market Value - Amount Owed. If you owe $15,000 on a car worth $12,000, you have negative equity (-$3,000) and the trustee has zero interest in your vehicle. If you own a car worth $8,000 free and clear, you have $8,000 in equity that must fit within your exemption.
Motor Vehicle Exemptions
Every state has a motor vehicle exemption that protects a certain amount of equity:
- Federal exemption (available in some states): $4,450 per debtor
- Some states offer higher amounts: Missouri ($3,000), Kansas ($20,000), California (up to $7,500)
- Married couples filing jointly may be able to double the exemption (stack)
- Wildcard exemptions can sometimes supplement a low vehicle exemption
What Happens If Equity Exceeds the Exemption?
If your equity exceeds the exemption, the trustee theoretically could sell the car to pay creditors. However, in practice the trustee must consider whether the sale would generate meaningful funds after paying exemptions, sales costs, and trustee fees. Many trustees will abandon interest in a vehicle where the excess equity is small.
You may also have the option to pay the trustee the non-exempt equity amount in cash to keep the vehicle, though this must be negotiated.