When you file BK, you are a debtor in possession
. This means that your assets do not belong to you, but rather that they belong to the BK estate which is controlled by the trustee.
Section 323(a) provides that the chapter 7
trustee is the representative of the estate. The trustee is a fiduciary
charged with protecting the interests of all estate beneficiaries - namely, all classes of creditors, including those holding secured, administrative, priority, and non-priority unsecured claims
, as well as the debtor's interest in exemptions and in any possible surplus property.
The trustee should administer the estate so as to maximize the distribution to the beneficiaries. To represent the estate, the trustee must secure for the estate all assets properly obtainable under applicable provisions of the Bankruptcy Code
, object to the debtor's discharge where appropriate, defend the estate against improper claims or other adverse interests, and must liquidate the estate as expeditiously as possible for distribution to creditors.
If you do not comply with the trustee or if it is perceived that you are not cooperating with the liquidation of estate assets, the trustee can get a court order and have you turnover the car to him under Section 542.
So, what you have is a case where the trustee has a duty to maximize payment to the creditors and while you still get to claim the exemption amount. However, where the value of the collateral exceeds you exemption amount, the trustee has a right to sell it and pay you the exemption amount and pay distribute the remainder to the creditors.