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If the Medicaid recipient can no longer drive, it makes no sense to keep it or pay it off. Sell it for the balance of payments if that is what it is worth.
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Medicaid allows for 1 car to be an exempt asset. Some states have a limit as to the value of the car, just like states have a value ceiling on a home.

So to me, I'd find this out first as if that car is over the value allowed, all this is a non-starter.

But if it's under the limit, the ? would then shift to does keeping a car make sense? If there is a community spouse, it does. But if you are going into a NH on medicaid, not really. Once in a NH you are under skilled nursing care & perhaps not competent to drive. Also cars have costs beyond a car note, like insurance & taxes & maintenance. Once on NH Medicaid, you will basically have no $ to pay any of those as all your income must go to the NH as your copay less a small allowance each month. So just who will pay all those expenses?

Legally you still own it and if family drives it, you are still responsible & liable. An auto insurance co may not honor any insurance claim filed unless all secondary drivers are listed in policy and car garage updated.
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