If I file bankruptcy, can I keep my cars and motorcycles?

If I file bankruptcy, can I keep my cars and motorcycles?

Most likely, yes. The answer depends on the equity you have in your vehicles and the type of bankruptcy case you pursue.

Let’s start with a Chapter 7 bankruptcy. This is a liquidation bankruptcy in which the bankruptcy trustee sells your property to pay your creditors. Fortunately, the trustee has little interest in operating a used car business or conducting a yard sale with your personal possessions. The trustee is mainly interested in high-value property that can be quickly sold and used to pay creditors. Unless you own luxury vehicles or other expensive motorized toys, your vehicles should in most cases be safe from the trustee. The reason is simple: Georgia state law contains exemptions that protect many assets from liquidation by the trustee.

Georgia Code Section 44-13-100 allows debtors in bankruptcy to keep up to $5,000 in personal property (including motor vehicles). Add to this amount Georgia’s $1,200 “wildcard” exemption of plus any unused homestead exemption amount up to $10,000. In the case of a joint bankruptcy filing with your spouse, these exemption amounts will be roughly doubled. Unless the value of your motor vehicle(s) significantly exceeds the exemptions, there is a chance — given proper pre-filing planning — that you will be able to keep them all in a Chapter 7 bankruptcy.

If you are still paying loans for any of your vehicles, you will need to reaffirm those loans and continue making regular payments after your case is concluded.

In a Chapter 13 bankruptcy, the debtor can keep both exempt and non-exempt property. However, instead of having the bankruptcy trustee sell off the non-exempt property, the debtor must pay to unsecured creditors an amount equal to the value of the non-exempt property as part of the Chapter 13 payment plan.

For example, if you have $12,000 equity in a motor vehicle and you dedicate the full $5,000 personal property exemption to that vehicle, then there will be $7,000 of non-exempt value that must be paid to unsecured creditors as part of your Chapter 13 payment plan.

In the case of multiple vehicles on which you are still making payments, the trustee (and possibly your unsecured creditors) may object to a Chapter 13 plan that calls for continued monthly payments for those vehicles. You will have to prove that it is reasonable to continue paying for each vehicle. If your spouse does not work outside the home, the trustee may find that it is unreasonable to keep paying for more than one motor vehicle. Payments for a second, luxury vehicle will attract scrutiny. Similarly, the trustee may find that monthly payments for recreational vehicles, boats and motorcycles are also unreasonable. Unless they can be protected with an exemption, those assets may have to be sold, with any available proceeds distributed to unsecured creditors.

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