We are often asked by our clients how many vehicles they are allowed to own in bankruptcy.
The bankruptcy code does not specify the number of autos that a debtor may own. Therefore, theoretically, the debtor may own as many as they wish.
In a chapter 7, although unusual, the trustee is permitted to sell the debtor’s property that has a substantial value in excess of exemptions. The debtor is permitted to keep all the autos that can be exempted. Each debtor may apply his federal auto exemption of $3,450.00, in addition to any of his excess wildcard exemptions, which may be as much as $11,975.00. If a debtor owns autos that have a value in excess of the total exemptions applied to the vehicle values, the trustee may sell all vehicles that cannot be fully exempt.
In a chapter 7, the debtor cannot have disposable income after payment of his necessary and reasonable expenses. A chapter 7 trustee will not allow a debtor to use two auto payments for one person, as the second payment is not a necessary and reasonable expense.
The same issues relate to a chapter 13 case. The debtor must pay towards the unsecured debt, at least the amount of unexempt value in all vehicles. Therefore, any portion of an auto that cannot be fully exempted, must be paid to the unsecured debt through the bankruptcy plan. Also, in a chapter 13, the debtor must pay no less than all of his monthly disposable income to the trustee. In general, the trustee will not permit a person to apply two auto payments as expenses for one person, as the second auto payment is not necessary and reasonable. In other words the second auto payment is a luxury item and not a necessity. However, it is possible to settle this matter with the trustee and continue paying for the second auto, if the debtor consents to making a higher monthly trustee payment.
Robert Manchel, a New Jersey bankruptcy lawyer will discuss your bankruptcy questions at 1 (866) 503-5655.