Many Floridians contemplating bankruptcy believe that they can only keep one car when they file. This is because the Florida statutes only have one, “motor vehicle” exemption up to $1,000. Florida also has a $1,000 wildcard exemption as well as either a house or an additional $4,000 wildcard exemption. These wildcard exemptions can be used to keep a vehicle as well if the debtor decides. If a debtor had several vehicles worth less than $4,000, they could keep those vehicles. Note that the exemption amounts are only to be used on vehicle equity. If a car is worth $4,000 but has a $5,000 balance on the note, the vehicle has no equity and can be kept in the bankruptcy without using any exemptions.
There are two ways to keep a vehicle that has too much equity in a Chapter 7 bankruptcy. The first way is to go to a bank and to take a loan out with the vehicle as security. The funds from that loan can be used to pay for reasonable and necessary living expenses, which can include attorney fees. So, if a vehicle was worth $6,000, a debtor could take out a note for $5,000 on the car and then spend that money on groceries, gasoline, electricity and the attorney who files their case. They could then reaffirm the debt on the car and keep it in the bankruptcy.
The second way to keep a vehicle that has too much equity is to enter into a “buy back” agreement with the Trustee. Since the Trustee would be auctioning off your vehicle if you couldn’t exempt it, they are often willing to sell you the car for a price slightly less than the vehicle’s value. This makes sense for the Trustee because by selling the car to you they no longer have to pay any auction or repossession fees. The Trustees will also accept these payments over a reasonably long period of time, occasionally as much as a year.
If you have a car or truck (or both) that are near and dear to your heart, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.