Most states allow debtors to exempt at least one motor vehicle, but the amount of the exemption is limited. The federal exemption scheme allows each debtor to claim $2,775 in a motor vehicle.

Whenever the equity in your car exceeds your total exemption, a Chapter 7 trustee can sell the car and pay you the value of your exemption.

For example, when your motor vehicle exemption is $1,500, and your car is worth $2,500, the trustee can sell your car but has to pay you $1,500. You're usually given the opportunity to keep your car by paying the net amount that the trustee would receive from selling the vehicle.

In a Chapter 13 bankruptcy, the trustee can't sell the car, but you'd have to pay the amount of nonexempt equity ($1,000 in the previous example) over the life of the bankruptcy plan.

You may also be able to claim an exemption for your motor vehicle as a tool of the trade -- if that's what it is. For example, a professional driver's semi rig is likely to qualify, and a specifically modified pickup truck used by a carpenter probably fits the fill. But you're really pushing your luck if you try for an exemption on the sports car that you use to impress your sales clients.