When you file for bankruptcy, you are allowed certain exemptions to protect a certain amount of property so that you can start your life afresh. Generally, any item which is deemed essential for the debtor and their family is protected from creditors. These exemptions include homestead, personal property, retirement accounts, etc. Lawyers of Dallas based bankruptcy law firm Recovery Law Group inform that different states have varied levels of exemptions. In Florida, bankruptcy filers can protect $1,000 in vehicle equity, while financed vehicles can be kept through a bankruptcy case.
However, if you are trying to protect a luxury vehicle during bankruptcy proceedings, it won’t be possible. The rules change when the vehicle in concern has an unreasonably large amount of equity, protecting it under Chapter 7 bankruptcy is not possible. Reaffirming the debt for, say a Maserati, will be unreasonable in case of Chapter 7 bankruptcy. In the case of Chapter 13, you can keep high-value luxury vehicles, however, you need to undergo some tests:
- Feasibility Test – It is used to test whether the repayment plan submitted for approval is reasonable or not. if you are not earning enough to support the payment for a luxury vehicle, then the plan becomes unfeasible. For example; while earning $1,200 per month, you cannot be allowed to contribute $700 for the monthly payment of your luxury vehicle.
- The best interest of Creditor Test – Formally known as 11 U.S.C. § 1129(a)(7)(A)(ii), it requires that creditors get as much money in repayment as they would have got if the (protected) asset was liquidated in Chapter 7 bankruptcy. Thus, if you wish to keep a motorcycle, which otherwise you would not have been able to protect through exemptions, you would have to either hand it over to the bankruptcy trustee or pay an amount equivalent to its value to your unsecured creditors over the period of your repayment plan.
Though it may feel you end up losing everything when you file for bankruptcy, there are ways in which you can protect your vehicles, even luxury ones like expensive cars and motorcycles. However, to do so, you might require the assistance of skilled lawyers. To discuss your case with experienced bankruptcy lawyers, you can call 888-297-6023.