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.

As a result of such situation, you have reduced your net worth. Before selling the car, your net worth is $12,000-$7,000=$5,000. After selling the car and paying off the loan, it’s $2,000. As you can see it reduced $3,000. Hope this answers the question. Have a nice day.