This question is about how automobiles are treated in bankruptcy proceedings when the car is either:

  1. Not fully paid yet
  2. A lease car

For the sake of the question, here's some scenario:

Mr. John Doe is 34 year old, unmarried, and lives in Massachusetts. He has unsecured debt (credit cards and the like) for $26,500 and has recently lost his job.

Before losing his job, his yearly salary was $91,300. His current monthly rent is $2,100.

Because it looks unlikely that he can find another one that pays a similar amount (so that he can make payments on his unsecured debt) he contemplates applying for bankruptcy under Chapter 7.

Mr. Doe's assets include:

  • A Toyota Camry 2011 LE Sedan 4D (with no "extras") and 65K miles on it. He had purchased this car for $16,000 through a loan from Bank of America. The outstanding balance on the loan is currently $12,280; he has therefore paid $3,720 on this vehicle so far. Based on information at Kelley Blue Book, a fair market value for this car is currently between $9,808-$12,579.
  • A Ford Escape 2014 "Titanium" lease car. He paid $2,000 down when he signed up for the lease. There is one year left on the lease.

Mr. Doe does not own a house (or other property) or any particularly valuable items that can be sold to cover the unsecured debts.

According to the information here:

In Massachusetts, you can exempt up to $7,500 in equity in your car or other vehicle that you use for personal transportation or to find or maintain employment. If you are 60 years of age or older, or if you are disabled, you can exempt up to $15,000.

However, looking at the Kelley Blue Book value of the current value of the Toyota (a max. of $12,579) and the current balance of his car loan, it looks like there is a negative equity (as explained under "Your Equity If You Have a Car Loan" on this page) of -$1.

On another hand Mr Doe has also a lease car.

[Updated the questions as the leased Escape does not belong to Mr. Doe. There is no equity in it as it is a lease car.]

The questions I wanted to ask :

  1. Is the Toyota "exempt" since it has a negative equity even under Kelley Blue Book's "best price"?
  2. If I am one of the creditors, is it possible for me to place a lien on the Toyota (in the event that it is "exempt")?
  • 3
    As an easy part answer, the leased Escape does not belong to John Doe.He has no equity in it, and it will not be part of any bankruptcy settlement. You also haven't said whether the BoA loan is secured on the Toyota. Commented Dec 30, 2015 at 20:59
  • Thanks @DJClayworth for the information. I have removed the Escape out of the questions in order to simplify the questions.
    – user100487
    Commented Dec 30, 2015 at 23:45
  • Cars with car loans: the bank probably reposesses the car before anything else happens, since they have a clear claim on it.
    – keshlam
    Commented Dec 31, 2015 at 0:48
  • Having this much debt is not an issue at all. If he can't find a job with a similar income, a lower income job would still EASILY pay these debts. Filing for bankruptcy with a total debt like that would be nuts.
    – sequence
    Commented Sep 22, 2020 at 12:13

1 Answer 1


I recommend seeing an attorney.

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