Can I keep my Boat in my chapter 7 Bankruptcy?

September 12, 2013

Most people who are filing for bankruptcy find that the exemptions will cover all of their property and therefore no assets are ever sold to pay creditors, but what happens if you have luxury, or recreational vehicles? The answer is that it depends. There are several issues that an attorney would have to look at to determine if you can keep this type of property. This article will discuss the different issues involved in keeping luxury, or recreational vehicles.

The first thing is whether or not the debtor has any equity in the vehicle. Equity means the difference between the amount you owe and the amount the vehicle is worth. In other words if you own a boat that is worth $10,000 but you owe $15,000 then you have ($-5,000) negative equity, however if that same boat worth $10,000 only has $5,000 owed on it then you have $5,000 in equity.
If the Debtor has no equity then the vehicle would not be worth anything to sell to pay creditors. This means that even if the vehicle is non-exempt, the value is not worth anything to the creditors. If the Debtor has a lot of equity then the Debtor will need to exempt the equity or it could be sold to pay creditors.

The next issue then becomes what exemption to use. Most recreational vehicles can only be exempt with the wild card exemption available under the federal exemption scheme. This exemption code will protect up to a certain dollar amount of the unused homestead exemption. If the vehicle is a trailer or something used in the debtor’s business there may be other ways to exempt the property, such as the business tools exemptions under either the federal or Texas state exemptions.

The last issue is if the debtor owes money on the property, can they afford to pay for it? Bankruptcy is an opportunity to get a fresh start. If you have a luxury or recreational vehicle, in order to keep it, you will need to continue to make your payments. If you don’t have enough income to make these payments, then it does not make sense to continue to make them. Furthermore, in order to stay on the note the debtor may be required to sign a reaffirmation agreement. Most courts won’t allow a debtor to keep an item that is not necessary, especially if they can’t afford to make the payments. For more information about bankruptcy, click here or call the experienced attorneys at the Fears Nachawati Law Firm at 1.866.705.7584.

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