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Can You Keep Multiple Cars in a Chapter 13 Bankruptcy?

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A Chapter 13 bankruptcy allows you to keep your property while proposing a plan to repay your creditors over time. Among other uses, Chapter 13 can help you keep your car as you seek to catch up on missed loan payments. But what if you have more than one car? Can a Chapter 13 repayment plan help you keep 2 or 3 vehicles?

Bankruptcy Courts Must Consider Debtor’s “Good Faith”

The answer is that it is technically possible to keep multiple cars in a Chapter 13 bankruptcy. But in practice, it will likely be difficult to convince a judge to sign off on such a proposal. A recent bankruptcy case from Alabama helps to illustrate why.

This case, In re Pettway, involved a single mother (the debtor) with two teenage children. The debtor filed for Chapter 13 bankruptcy. She proposed a repayment plan enabling her to keep three cars, one of which was used by her 19-year-old daughter. The debtor testified she purchased the car as a “gift” for her daughter, and that she was making the payments.

The Chapter 13 trustee and the creditor holding the car loans objected to the repayment plan. The bankruptcy judge said the debtor failed to prove a legitimate need for more than one car. Additionally, the debtor’s daughter held a full-time job, suggesting she was more than capable of paying for her own car.

More to the point, the judge said the debtor failed to propose her repayment plan in “good faith.” Bankruptcy courts look at a number of factors when deciding if a debtor has acted in good faith. Here, the judge said the debtor did not act in good faith because she was attempting to keep multiple cars “at the expense of unsecured creditors” who would receive less under her proposed repayment plan. The judge therefore ordered the debtor to file an amended repayment plan, under which she can only keep one car.

Contact a Tampa Chapter 13 Bankruptcy Lawyer Today

Florida law provides a $5,000 exemption for a debtor’s interest in a single motor vehicle during bankruptcy. (The Florida legislature recently increased this exemption, which was previously just $1,000.) This means that you can always protect up to $5,000 in the value of your car less what you owe on any secured loans. If you want to protect additional vehicles in a Chapter 13 bankruptcy proceeding, you need to show that you have sufficient disposable income to pay not just your outstanding car loans, but your other debts as well. As the case above demonstrated, judges are not going to cut you slack to keep additional vehicles if you lack the resources to keep current with all of your obligations.

Therefore, while there is no explicit limit on the number of cars a person can hold in Chapter 13, the exemptions apply to the value of the vehicles. If the value of a debtor’s motor vehicle exceeds these exemption limits, the excess value may be subject to the claims of creditors. It is important to note that each vehicle must be individually valued and a separate motion must be filed for each vehicle to determine its secured status in the Chapter 13 plan S.D. Fla. Bankr. LR 3012-1, Valuation of Collateral., S.D. Fla. Bankr. LR 3015-3, Chapter 13 Valuation of Collateral. Chapter 13 Confirmation

If you have questions about what cars or other property you are allowed to keep when filing for bankruptcy, it is best to speak with a qualified Tampa Chapter 13 bankruptcy attorney. Contact Florida Law Advisers, P.A., today to schedule a free consultation.

Sources:

scholar.google.com/scholar_case?case=993714016085901288

m.flsenate.gov/statutes/222.25

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