While it is true that the exemptions allowed in Florida only allow you to keep $1,000.00 of equity in a motor vehicle, most people who file bankruptcy in Jacksonville, Florida get to keep their vehicles. This is because financed or leased vehicles can just about always be kept by simply continuing to make your normal monthly payments as if the bankruptcy was never filed. This is of course as long as the vehicle is a reasonable necessity for your, or your dependents’, care and support.
What if my vehicle has equity?
A different set of rules applies however when your vehicle has equity that is above the $1,000.00 exemption that is allowed in Florida. For example, when you owe your vehicle free and clear. In such a situation, you might be able to use a wild card exemption to protect the rest of the equity. However, if you are unable to exempt all of the equity, then you may be forced to surrender the vehicle or pay your Trustee the un-exempt equity amount in order to keep the vehicle. Most of the time, your Trustee will allow you to make monthly payments for the equity.
There are two tests that the Trustee will do in deciding if you should keep your vehicle. The first is to determine whether it is feasible. Meaning, if the monthly payments are reasonable and affordable for you. The second and more significant test when keeping the vehicle is whether it is in the “best interest of your creditors.” United States Bankruptcy Code 11 U.S.C. § 1129(a)(7)(A)(ii) states that in a Chapter 13 Bankruptcy, your creditors must receive, at the very least, the amount they would have received had you filed a Chapter 7 Bankruptcy. As an illustration, if you own a motorcycle and wish to keep it in your Chapter 13 Bankruptcy, then if that motorcycle would have been liquidated in a Chapter 7 Bankruptcy, then you will either have to surrender the motorcycle or pay the value of it through your Chapter 13 Plan.
What if I owe more than my vehicle is worth?
If you owe more than your vehicle is worth, wish to keep it, and are filing a Chapter 13 Bankruptcy in Jacksonville, then you might be eligible for something known as a “Cram-Down.” A “Cram-Down” is when you ask your Chapter 13 Judge to establish the value of your vehicle and then to decrease the secured amount of your loan to the vehicle’s value. The amount of your loan that is over the vehicle’s value then becomes part of your unsecured debts. To explain, say that you owe $20,000.00 on your Maxima, but your Maxima is only worth $12,000.00. The court could then potentially lower your loan amount to $12,000.00 and make the remaining $8,000.00 an unsecured debt. When you complete your Chapter 13 Plan, then the unsecured $8,000.00 will be discharged.
In short, there is most likely a way for you to keep your motor vehicle(s) regardless of filing a Chapter 7 or Chapter 13 Bankruptcy in Jacksonville, Florida. This is specifically true for vehicle’s that are necessary for your daily lives. However, the bigger question is going to be whether it is a good business decision to keep it after taking into account the vehicle’s value, loan amount, and what it is going to cost you to keep it. Speaking with an experienced Jacksonville Bankruptcy Attorney can help you figure out what is best for you and your family. Contact the Law Office of David M. Goldman, PLLC today at (904) 685-1200 for your free consultation.