Keeping Your Vehicle During Bankruptcy
- June 1, 2016
- Bradford Love
- 16 Comments
In my first week, I have been presented many questions regarding the various areas of practice here at the Kotlyarov Law Group. The first issue I would like to address involves the status of a person’s vehicle when filing for bankruptcy. There are a few different options from which one can choose in this regard.
First, determine whether or not you are caught up on your vehicle payments.
Whether or not someone is behind on his or her car payments can determine whether they file a Chapter 7 or a Chapter 13 and/or whether or not they want to keep their car.. If one is behind on his or her car payments, he or she will likely have to surrender the vehicle to the lender if filing Chapter 7.
If he or she pays off the missed payments during the automatic stay of debts after filing for Chapter 13, he or she may then reaffirm the loan with the lender and keep the vehicle. This means that he or she will have to pay off the vehicle, including the the amount he or she is behind on the vehicle through his or her Chapter 13 plan.
The second question one must ask is how much is his or her vehicle worth.
The value of a vehicle is important because of something called exemptions. To put it in simple term, an exemption is what allows people to keep their stuff in a bankruptcy from being liquidated and sold for the benefit of their creditors. The state of Missouri allows a $3,000 motor vehicle exemption per individual ($6,000 for married couples, assuming both of their names are on the vehicle(s).
The Western District of Missouri generally uses the N.A.D.A. value of the vehicle. Click the link to go their website and find out what they value your vehicle to be worth.
Once valued, the bankruptcy attorney or professional can use that information to determine whether or not someone can keep their vehicle. For example, if someone has a car valued at $10,000 for which he or she has $2,000 in equity, he or she may exempt the car from being repossessed by the lender because their equity interest is below the $3,000 exemption threshold.
On the other hand, if someone is has a car valued at $10,000 and owns it outright, he or she will have to either surrender the vehicle to the bankruptcy estate or find a way to pay $7,000 to the bankruptcy estate if they want to file for a Chapter 7 bankruptcy. Therefore, the general idea is that the person must own $3,000 dollars or less of an interest in a vehicle for it to be considered exempt, and therefore allowing the person to keep it.
Additionally, there have been some questions as to what qualifies as a “motor vehicle” in the state of Missouri. Basically, it seems that Missouri sees a “motor vehicle” as a car, truck, motorcycle, or all-terrain vehicle (not an exclusive list). Essentially, Missouri is looking to exclude watercraft in its definition of “motor vehicle.” However, the relevant precedent appears to only address recreational watercraft.
This is solely meant to be a rough informational overview of the motor vehicle exemption for the state of Missouri bankruptcy procedures. Because I am currently only a student and not yet licensed to practice law, it is not meant to constitute legal advice in any way but merely a description of what could possibly be the case. If one wishes to learn more, he or she should consult a licensed professional. The opinion above reflects the author’s individual thoughts and may not reflect the opinions of the Kotlyarov Law Group as a whole.