The fear of losing everything is a very real fear for many bankruptcy filers. However, this is one of the most common bankruptcy myths, and can keep individuals who are drowning financially from filing for bankruptcy. One concern many filers have is whether they will be able to keep their mode of transportation after filing for bankruptcy.
The good news is most filers will be able to keep their vehicles after filing for bankruptcy. Florida bankruptcy laws offer generous exemptions which allow individuals to keep various types of property, including their vehicle. Under the Florida Motor Vehicle Exemption, bankruptcy filers can exempt up to $1,000 in motor vehicle equity. This amount can be even more if a married couple is filing for bankruptcy jointly.
The key to whether a filer can keep his or her car has to do with how much equity he or she has in the vehicle. This value will be declared in the initial financial paperwork completed by the bankruptcy filer and submitted to the bankruptcy trustee. The filer will need to report what the current value of the vehicle is, which would be how much he or she would be able to get for the car, given its age, condition and how much is owed on the vehicle. If the person does not owe anything on the car, the equity is what the car is worth. If a loan is owed on the car, the equity is what would be left after the car is sold and the loan is first paid off with the proceeds.
Florida bankruptcy filers can protect up to $1,000 for single filers or more for joint bankruptcy filers after that calculation is made. If the car’s equity is less than the exemption, the trustee will allow the filer to keep the car in most circumstances since nothing will be available to pay creditors after selling the vehicle. The filer will need to reaffirm the debt and continue paying on it after the case is over.
The filer can keep this exempt property so long as it keeps its exempt status. If the person is pursuing a Chapter 7 bankruptcy case, and the property falls under nonexempt status, that property is not protected. The bankruptcy trustee is within his or her discretion to liquidate the property and use the proceeds to pay down applicable debt.
Even if the car’s equity is more than what would be exempt under bankruptcy law, the bankruptcy trustee may allow the filer to pay for the amount that is nonexempt and keep the car. Most filers need their vehicles to get to and from work, so it is important for them to be able to do whatever is possible to maintain their mode of transportation. The bankruptcy trustee may let the filer negotiate a deal with what the creditors would receive and give the person a few months to come up with the money needed to pay off the vehicle.
Other times, the filer may be able to claim the remaining nonexempt equity in the car under the wildcard bankruptcy exemption, which allows the filer to exempt $4,000 of personal property for single filers and $8,000 of personal property for joint filers.
If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.