Although bankruptcy filers using Florida exemptions are only allowed to keep around $1,000 in vehicle equity, financed vehicles can almost always be kept through a bankruptcy case. Generally, items that are reasonably necessary for the care and support of the debtor and their dependents are exempt from seizure for the benefit of creditors. For more about exemptions, read my article on Keeping Personal Property in Bankruptcy.
Different rules apply when the vehicle is unreasonable or has an inappropriately large amount of equity. For instance, a Maserati may be unreasonable to attempt to reaffirm in a Chapter 7. In Chapter 13 there are two mechanisms that can cause problems with keeping high value or unnecessary vehicles. The first of these is the “Feasibility Test” of the Chapter 13 plan. When you submit a payment plan in Chapter 13 the plan itself must be reasonable. If you’re making a $700 payment per month on a turbocharged super-mobile and only make $1,200 a month, your plan may be unfeasible.
The second and more likely test is the “best interest of the creditors” test. This test, more formally known as 11 U.S.C. § 1129(a)(7)(A)(ii) requires that the creditors in a Chapter 13 obtain at least as much money for their claims as they would in a Chapter 7 liquidation case. If a debtor retains a motorcycle that would have to be liquidated in a Chapter 7, the debtor must either turn the vehicle over to the Chapter 13 trustee or offer to pay the value of the motorcycle to the unsecured creditors over the life of the plan.
Overall, there is often some way to keep your vehicles, especially those necessary for your daily life and there are even some occasions when you can keep luxury vehicles. If you have questions and want to make sure your bankruptcy is done properly so that you can retain all the vehicles you can, contact a Jacksonville Beach Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.