Personal-Property Collateral in Chapter 7
Learn about the rules governing whether a chapter 7 debtor can retain tangible personal property securing a debt.
Suppose Debbie Debtor files for chapter 7 bankruptcy owning a car worth $12,000. The car is estate property, but Debbie properly claims an exemption of $4,000 in the car. Also, the car secures $10,000 in debt to a bank, which Debbie incurred to purchase the car. Debbie wants to keep the car after the bankruptcy, because she needs the car to get to work and run important family errands. Indeed, the main reason Debbie filed for bankruptcy was to stop the bank from repossessing the...