<h2>New Jersey Lawyer Explains When A Person May Keep A Motorcycle In A Chapter 7</h2>
Over the many years of practicing bankruptcy law, I have noticed that peoples’ motorcycles are their most treasured property. When I counsel a person about their Harley Davidson, there is great concern on their faces. I understand that in some instances their motorcycle may hold more importance than their house or car.
In a New Jersey chapter 7 bankruptcy case, typically, a motorcycle is treated as a luxury item, unless the debtor needs the vehicle for work transportation. I have stated, on numerous occasions, the chapter 7 bankruptcy criteria, in other blogs. The criteria as to whether a motorcycle owner is entitled to a bankruptcy discharge is different than the criteria that is applied to whether the motorcycle owner can keep his motorcycle. In other words, a person may be entitled to a discharge and lose his motorcycle. Also, a person may not meet the criteria for a chapter 7 discharge and be permitted to keep his motorcycle, if they filed a chapter 13.
In New Jersey, a debtor can only keep assets that are fully exempt and that do not have a substantial value. The application of exemptions is explained, in detail, in numerous other blogs. I will briefly explain the exemption process, as follows. If a debtor can fully exempt the value of a motorcycle, the debtor may keep the motorcycle. The bankruptcy code exemptions are listed in 11 U.S.C., section 522(d). Section 522(d)(2) allows a $3,675.00 exemption in one motor vehicle. Typically, this exemption is used for the debtor’s car. However, theoretically, this exemption may be applied to a motorcycle.
A debtor may also apply, in any property, a portion of the exemption that is not used or needed for their house. Each debtor has a $22,975.00 exemption that may be applied towards the equity in their house. Bankruptcy code section 522(d)(5) permits the debtor to use up to $11,500 of the unused portion of this household exemption in any property, in any amount. Additionally, section 522(d) permits the debtor to apply 1,225.00 in any property. By way of example, said $11,500.00 and $1,225.00 exemptions may be applied to: $5,000.00 checking account funds; $4,000.00 of stock; and, a $3,725.00 antique vase.
The debtor may clearly keep a motorcycle, if there is no profit to be earned from selling the motorcycle. For example, a debtor may keep a motorcycle that has a $20,000.00 value, with a $21,000.00 financing payoff amount. The debtor is permitted to keep the vehicle because the bankruptcy code does not permit the elimination of the motorcycle’s financing lien. For example, if the motorcycle’s value is $20,000 and the motorcycle financing payoff balance is $21,000, the trustee will be unable to payoff the $21,000.00 lien with a $20,000.00 sales’ price.
However, a trustee will be permitted to sell the motorcycle, if there are funds available after deducting the motorcycle financing payoff and all of the applied exemptions. Look at the following example:
Auto value: $25,000.00
Financing Payoff: $2,000.00
522(d)(5) exemption: $11,500.00
522(d)(5) exemption: $1,225.00
Based on the above example, the trustee could sell the motorcycle and receive $10,275.00 from the sale. The debtor would receive $12,725.00, which is the amount of the debtor’s applied exemptions. Please note that the calculations generally include the costs to sell the motorcycle. Also, there may be many other issues that modify the figures that are used.
Contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.