Many people enjoy motorcycles in their free time. Here we will discuss different scenarios for motorcycles in a Chapter 7 Bankruptcy Case.
The following pertains to a single Chapter 7 debtor, who is the sole owner of a motorcycle, that is owned free and clear of liens and financing
Assuming the motorcycle is owned free and clear of liens and financing, the debtor may keep his motorcycle in a chapter 7 if the motorcycle is fully exempt. In other words, if the amount of exemptions available to apply towards the motorcycle are in excess of the vehicle’s fair market value.
As explained in a separate part of my website, a debtor may apply his federal bankruptcy exemptions to personal property and real estate. The amount of exemptions is based on the type of personal property. The Federal exemptions in the bankruptcy code are modified periodically. At this time, a debtor is permitted to apply $3,450 towards a motor vehicle, plus $1,150 towards any property. Additionally, the bankruptcy code permits a person to use up to $10,825.00 of the exemptions that are not applied or needed towards their residence. Therefore if a single debtor, who is the sole owner of a motorcycle, does not need to apply the aforementioned exemptions towards any other property, he may be able to keep a motorcycle with a retail fair market value of approximately $15,425.
The following pertains to an individual chapter 7 debtor with motorcycle financing
In general, a chapter 7 debtor should not be able to afford motorcycle financing payments, which is typically considered a luxury item in bankruptcy. Therefore, the debtor can surrender the motorcycle and eliminate the financing debt.
In order to keep the motorcycle, the debtor must be able to fully exempt the retail fair market value of the vehicle, as explained above. However, the amount of the exemption(s), must only be applied towards the equity of the motorcycle’s retail value. This means that the exemptions explained above only need to cover the difference between the retail value, minus the financing payoff amount. If the retail value is $10,000 and the financing payoff is $7,000, than only $3,000 must be exempted.
In addition to the application of exemptions, the debtor may need to comply with the laws concerning reaffirmation agreements.
Please note that the above explanation is general information, which may not apply in your particular circumstances. Also, it is very unusual to have exemptions of $15,425 available for a motorcycle.
Robert Manchel, NJ Chapter 13 Bankruptcy Attorney, provides expert bankruptcy advice at (866) 503-5655. Call today to discuss your personal situation and bankruptcy protection.