Under Chapter 7 Texas bankruptcy rules, the bankruptcy trustee is able to seize your automobile and sell it to cover your debts if it is worth more than the value of the exemptions you are able to place on it. Depending on the value of your car and the exemption amount, this could be bad news for your ability to keep your car. But there is a silver lining here that may allow you to keep your car while in Texas bankruptcy even if you cannot claim the full amount for exemption.
The Abandonment Process in Chapter 7
In certain Chapter 7 Texas bankruptcy cases, the bankruptcy trustee will abandon the car if its value does not exceed the exemption amount by enough to make a difference during any potential sale. Here is a rough breakdown of how this process might work. The federal auto exemption is $3,450. If your car is worth, say, $4,000, you cannot exempt the full amount (although under Texas bankruptcy law, you may be able to, but this is only an example). After exemption, then, the saleable value of the car is $550. After the selling fees, and the commission which the bankruptcy trustee gets on the price of the sale, there would be little enough left of that $550 to pay back the debts you owe. In this case, the trustee will likely abandon the car, allowing you to keep it in your Texas bankruptcy.
The abandonment process can allow you to keep any asset that exceeds the exemption amount, but which will not be valuable enough after exemptions to pay back any debts you owe in your Chapter 7 liquidation.