The amount of equity in a motor vehicle is a large factor in determining whether a bankruptcy trustee may take a motor vehicle to repay general, unsecured creditors. If the equity in a car is minimal, then a chapter 7 trustee will typically not sell it. However, if the equity in a motor vehicle is significantly more than the amount of any and all applicable exemptions, the likelihood of a chapter 7 trustee selling the vehicle to repay unsecured creditors increases. However, it is important to note that there are other Florida exemptions which a debtor may use to apply to the equity in his or her motor vehicle.
In Florida, the motor vehicle exemption is $1,000 of equity in a car or other vehicle. For example, if a debtor owns a car worth $12,000 and owes $11,000 on the loan, leaving $1,000 of equity in the car, the debtor may protect all of the equity in his or her car using the Florida motor vehicle exemption of $1,000. If the motor vehicle is owned free and clear, then any value in the car over $1,000 becomes the property of the bankruptcy estate.
In Florida, debtors may be able exempt additional equity by using the personal property exemption. Florida’s exemption statute and constitution allow individuals to protect up to $1,000 worth of any personal property, such as the excess equity in a motor vehicle.
Also, if a debtor does not use the homestead exemption to protect a personal residence, he or she may exempt up to $4,000 of additional equity in the motor vehicle. Prospective Chapter 7 debtors should consult an experienced and qualified bankruptcy attorney who may provide the required legal advice based on a prospective debtor's financial facts and circumstances.
For debtors who decide not to keep a motor vehicle or cannot afford the payments, surrendering the vehicle is an option. When a motor vehicle is surrendered, a debtor simply returns it to the creditor, thus extinguishing any personal liability on the debt which will then be discharged as an unsecured debt in the Chapter 7 bankruptcy case.
If you have purchased an automobile and are experiencing problems repaying the debt and are approaching default, call Loan Lawyers, South Florida consumer rights and debt defense attorneys who help individuals with problems related to the payment of their debts. Contact our office today by calling (888) FIGHT-13 (344-4813) and see how we can help.