Tuesday, October 13, 2015

     I recently read an article on the internet concerning a debtor inquiring as to whether they could keep their $31,000 car if the person filed bankruptcy; the car was paid off. The article is fair in its analysis. It mentions the debtor being able to keep the exempt value of the vehicle, and the exempt amount will vary according to what jurisdiction you are filing in. For example, if the debtor was filing in a jurisdiction that allows for a $15,000 automobile exemption, upon the sale of the automobile by the Trustee, the debtor would be able to keep the first $15,000 of the sale proceeds. The balance would be distributed to creditors.
The article mentions the availability of three options:
  1. Surrender the vehicle. As mentioned above, the car will be sold, and the proceeds distributed.
  2. Settle with the Trustee. Within my jurisdiction (Florida), this is the most common, as the trustee would prefer to settle and distribute proceeds without the time and expense of selling the vehicle, and the debtor would prefer to keep the vehicle. In this case, the debtor simply pays the to the Trustee an agreed amount to repurchase the portion of the non-exempt vehicle from the bankruptcy estate.
  3. File a Chapter 13. In this case, you are still repurchasing the non-exempt vehicle from the bankruptcy estate, but you are able to do so in 3 to 5 years. Payments are simply made to the Trustee.
      While this is a very good simplified analysis of what can be done, you should check with a competent bankruptcy attorney in your area to find out your available exemptions, and any other alternatives that may be available. This is an area of bankruptcy where the attorney's experience may be able to greatly benefit you.  There may be additional available exemptions you can use to increase the amount of the vehicle you can keep when filing, or there may be some appropriate pre-filing planning that will result in either increasing the amount of available exemptions, or reducing the amount of vehicle available to the bankruptcy estate.

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