You have a car that is valued at $12,000. the balance that you owe on the car loan is $7,000. you lose your job and can not afford to make payments on your loan so you sell the car for $9,000 and pay off the loan. explain how your net worth is affected by your actions.

The net worth reduce by $3,000.

Explanation:

The net worth is the difference between assets and liabilities.

Net worth = Total assets - Total liabilities.

It is given that the value of car is $12,000 which is an asset and the value of car loan is $7,000 which is liability.

Net worth = $12,000 - $7,000 = $5,000    (1)

The net worth before losing the job is $5,000.

After losing job the car sell for $9,000 and pay off the loan. He sell the car of $12,000 and get $9,000. So, the value of asset is 9,000. Now $7000 pay off for the loan. thus the net worth is,

Net worth = $9,000 - $7,000 = $2,000   (2)

From equation (1) and (2), we can say that the net worth reduce by $3,000.