Can I Keep My Recreational Vehicles And File Bankruptcy?
Posted on 19 March 2010 by Ted Agnick, The Lawyer
Are My Recreational Vehicles Exempt In Bankruptcy?
It depends. You can file Bankruptcy and keep your recreational vehicles if you are willing and able to pay the Bankruptcy Trustee the current market value of the vehicle (if you own it free and clear) or for any equity in it. If you cannot afford to pay the Trustee the market value or equity you have in the vehicle then, you will lose your recreational vehicle when you file for Bankruptcy.
Recreational vehicles such as quads, sand-rails, dirt bikes, jet skis, boats and ATVs are non-necessity items. These types of vehicles are not considered necessary to you establishing a fresh start. Therefore, they are not protected under the bankruptcy exemption statutes. Consequently, they are subject to being taken in a bankruptcy proceeding if you do not plan for your bankruptcy properly.
In a Chapter 7 Bankruptcy, you generally are not allowed to keep a recreational vehicle. In a Chapter 7 case, you must either: (1) surrender the recreational vehicle to the Trustee, or (2) buy the recreational vehicle back from the Trustee. If you surrender the recreational vehicle to the Trustee, the Trustee will sell it and after withholding the administrative expenses of the sale, pay the remaining proceeds to your creditors. One option you can pursue is to purchase back the asset, typically at a reduced price, from the trustee. The Trustee will then take your purchase proceeds, less his administrative expenses and pay the creditors.
For example, if you had a quad that was worth $2,500, the Trustee could sell the quad at an auction and perhaps get $2,000 for it. After subtracting administrative expenses for his efforts, as well as the cost of the sale, the trustee would be able to pay $1700 to the creditors. Or, you may offer to purchase the quad back from the trustee for $1500 and keep the quad. The trustee would then pay the $1500 less his administrative expenses to your creditors.
A better way to address the issue with your recreational vehicle would be perhaps to sell it before filing bankruptcy and place the cash proceeds into an exempt asset such as the equity in your home or your primary vehicle. In this scenario you get to keep the cash, but lose the recreational vehicle.
In a chapter 13 case, you could keep your recreational vehicle. However, you would have to pay the Trustee back the value of the asset over the life of the Chapter13 plan. Chapter13 plans last 3 to 5 years. So, for example, if the quad was worth $2,500, you would pay the trustee roughly $45 per month for five years to keep your quad. Again, this assumes you own the quad free and clear.
Under either chapter 7 or chapter 13, if you owe money on the quad, you simply have to keep making the payment to keep it. If you have a substantial amount of equity in the quad, and still owe money on it, you may have to pay the trustee an amount equal to your equity in order to keep the quad, or the trustee may take it and sell it if he believes there is enough equity in it to warrant the sale. In a chapter 7, if you were going to pay the trustee for the equity, you would have to pay it all in one lump sum. Whereas, in a Chapter 13, you can pay the value of your equity over time, in monthly payments, over the life of the Chapter 13 plan.
