All of us need to get around, getting groceries, run errands, get to work, or visit relatives. Being able to keep your car through a bankruptcy is a must for most people. Whether you can keep you car in the bankruptcy process depends on many factors. The following applies to Florida bankruptcies only. If you live in another state, please consult a bankruptcy attorney that is licensed to practice in your state.
EXEMPTIONS, WHAT ARE THEY? HOW DO THEY APPLY TO MY CAR?
Bankruptcies are designed to give you a fresh start. They are not intended to deprive you of all of your property. To understand the process, you first have to understand the concept of the bankruptcy estate. The bankruptcy estate is all property that you own that is not subject to exemptions. Property included in the bankruptcy estate is subject to sale to satisfy your creditors. Exemptions are property that is exempt from becoming part of the bankruptcy estate, in other words, property you are allowed to keep. In Florida the dollar amount of car equity allowed is $1,000 for single filers or $2,000 for married filers that file jointly. Unfortunately, if you own your car outright and it is worth more than $1,000 for a single filer or $2,000 for a married filer, filing jointly, and you car exceeds that value, then your car may be subject to sale to satisfy your creditors. However, your attorney may be able to work out an arrangement with the Trustee (the person assigned to administer your case) that will allow you to make payments on the non-exempt equity portion of your car's value. For instance, if you are a single filer with the $1,000 exemption amount and your car has a market value of $3,000, then you may be able to pay the Trustee the $2,000 of non-exempt equity over a period of time and keep your car. There are finance companies who will finance the purchase of the car for you if you can't afford to buy it back, however the rate will be high.
WHAT IF I HAVE A LOAN ON MY CAR?
As discussed above, it is the equity that you have in your car that is the determining factor as to whether the Trustee can sell your car or whether they can accept payments from you for the equity. If you owe money on your car, then the money you owe is subtracted from the market value to determine your equity. For example, if you have a car with a market value of $10,000 and you owe $12,000 then you have no equity. In that case you can normally keep your car as long as you continue to make your payments as agreed. There are some exceptions to that. Primarily, it has to be shown that your car payment will not place an undue burden on you. On the other hand, if you have that same car worth $10,000, but you owe only $5,000 then you will have $5,000 worth of equity, or $4,000 more than the exemption for a single filer. Again, your attorney may be able to work out a payment plan with the Trustee, or you may be able to finance the equity and keep the car. Short of that, you car may be subject to sale to satisfy your creditors.
ARE THERE ANY OTHER OPTIONS?
Yes, there may be, depending on your individual situation. In Florida, an individual filer is entitled to at least $1,000 personal property exemption. Or, if the filer does not use the Homestead Exemption, (usually non-homeowners), then the filer is entitled to a $4,000 personal property exemption. The personal property exemption is normally used to exempt clothing, furniture, electronics, and other property. Often there is some personal property exemption that is not used and is available to apply to car equity. Particularly in cases where the filer does not claim homestead exemption. To illustrate, a single filer that owns a car worth $3,000 and does not own a home and is eligible for the $4,000 personal property exemption can use the $1,000 car exemption and $2,000 of personal property exemption, thus exempting the car altogether from the bankruptcy estate.
What is a reaffirmation? If you own a car that has a car loan, then the entity that you owe the car loan to may ask that you sign a reaffirmation agreement. A reaffirmation is an agreement that is signed by the debtor (you) and the company that holds the loan on your car. The agreement reestablishes your debt to the entity and essentially puts you back into the same position that you were before, as to that particular entity, before you filed bankruptcy. In other words, if you default on the terms of the agreement, the entity can seek all legal recourse against you as if you had never filed bankruptcy. Whether it is in your best interest to sign the agreement is something that you should speak to your attorney about.
Obviously, if you have read this information, you will understand that bankruptcy is a complex process and should only be attempted with the advice of a competent bankruptcy attorney. At the Holland Law Group we focus on bankruptcy, debt and foreclosure defense. We pride ourselves on giving you and your case the personal attention it deserves.
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