In certain cases, persons who file Chapter 7 cases may keep their motor vehicles. An experienced Utah bankruptcy attorney like Theron Morrison can help solve immediate financial difficulties and help debtors retain as much of their property as the law allows.
Federal bankruptcy law allows debtors in bankruptcy cases to exempt property from their bankruptcy estate, which is the pool of property from which creditors are paid. In Utah, debtors may exempt $3,000 of value in a motor vehicle, $5,000 of value if it is a tool of the debtor’s trade or business. Joint or married debtors may double this exemption to $6,000 and $10,000, respectively.
Any value above these amounts is nonexempt property. Chapter 7 bankruptcy trustees are required to liquidate the debtor’s estate and pay unsecured creditors a pro-rata share of the debtor’s non-exempt property. Debtors are most likely to keep a car, motorcycle, or truck if the entire value of a motor vehicle is exempt, or if some minimal portion is nonexempt. In the latter case, the trustee may abandon the property, or simply abstain because the sale is not worth the expense, allowing the debtor to keep the vehicle.
Because the amount of the debtor’s equity in the motor vehicle is a significant variable in determining whether a debtor may retain a car in a Chapter 7 bankruptcy, debtors must establish the correct amount of equity that they have in a vehicle. If the equity is less than the amount of Utah’s motor vehicle exemption, then the property is exempt, and the Chapter 7 trustee may not liquidate it for sale.
However, if the equity in the motor vehicle is substantially more than the amount of the Utah motor vehicle exemption of $3,000, it is likely that the Chapter 7 trustee will sell the vehicle and use the proceeds to repay unsecured creditors. Debtors file a “Statement of Intention” to indicate their desire to keep or surrender their motor vehicles.
The Morrison Law Group is a team of seasoned bankruptcy attorneys who have helped 8,000 Utah residents file bankruptcy and gain a fresh start. Bankruptcy helps good Americans escape financial hardship and start over again. Call the Morrison Law Group at 801.456.9933 today to schedule a FREE consultation. We are Utah’s only statewide bankruptcy law firm and have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.
