Protecting Your Only Car From an Accident Judgment

Attorney Answer

Being sued is not the same as having your car taken, and even if a judgment is entered California law protects a set amount of a vehicle's value from a judgment creditor. Bankruptcy is a separate federal question with its own rules and its own costs, and it is not the first thing to look at. The first thing is your insurance.

If the car was insured, that coverage — not your property — answers the claim first. Cal. Veh. Code § 16056(a) sets the minimum liability limits a California driver must carry. For an accident in 2022 that floor was $15,000 for one injured person, $30,000 for the accident, and $5,000 for property damage; for accidents on or after January 1, 2025 it is $30,000 / $60,000 / $15,000. A liability policy also normally provides a defense to the lawsuit, though that is a matter of your policy's own terms rather than of any statute. Your own property is reached only if a judgment goes beyond what the insurance pays.

If that happens, the exemption statutes decide what a creditor can actually take. Cal. Code Civ. Proc. § 704.010 exempts $7,500 in any combination of the equity in a motor vehicle, the proceeds of an execution sale of one, and the proceeds of insurance for its loss. Read that carefully: it protects an amount of value, not the car itself. If what the car is worth, less what you still owe on it, sits inside that figure, there is generally nothing there for a creditor to take. If the car is worth a great deal more, the extra value is not protected. Cal. Code Civ. Proc. § 704.730 does the same job for a home, protecting the greater of the countywide median sale price for a single-family home in the prior calendar year, capped at $600,000, or $300,000, with the amount adjusted annually for inflation — so the protected figure depends on your county and on the year, and no page can hand you the number.

Bankruptcy sits outside all of that. It is federal, it has its own exemption rules and eligibility tests, and not every accident-related debt is treated the same way in it — how a court handles one can depend on how the accident happened. Whether filing would protect this car, and what it would cost you elsewhere, is a question for a bankruptcy attorney, and it is much better asked before a judgment than after one.

What you can do

1. Report the lawsuit to your auto insurer immediately and send them the papers you were served with. Late notice can cost you the defense the policy would otherwise provide.

2. Do not ignore the papers. A defendant who does not respond can have a judgment entered by default. The date to respond is on the documents themselves, and a local attorney can tell you what that date requires of you.

3. Find out what the car is actually worth and what you still owe on it. That difference is the only number the vehicle exemption cares about.

4. Ask a local attorney whether your policy limits cover what is being claimed, and what your exposure is above them.

5. If you are weighing bankruptcy, talk to a bankruptcy attorney before you sell, transfer or retitle anything. Moving assets ahead of a filing tends to make things worse, not better.

Most lawyers offer a brief initial call at no cost, and a few minutes on your specific facts is worth more than any general guidance, including this page.

⏱ Time limits apply. The person suing you had a deadline of their own: Cal. Code Civ. Proc. § 335.1 gives two years for an injury claim and Cal. Code Civ. Proc. § 338(c)(1) gives three years for damage to a vehicle. Whether a suit was brought inside those periods, and when each one started, depends on your facts — and the deadline to respond to the papers you were served with is separate and much shorter. Have a local attorney check all of it now rather than after a default.