When someone files for personal bankruptcy, he/she is required to disclose all assets, regardless of whether his/her name is on the title.
It happens quite often that a debtor’s name does not appear on the title to a vehicle. For example, maybe the debtor just bought the vehicle, especially from an individual, and has not filed the paperwork with the DMV yet. Or maybe the debtor’s credit was not very good and he/she couldn’t get a loan in his/her name and was fortunate to have a family member or friend who was willing to facilitate the purchase of the vehicle for the debtor. For all practical purposes, the vehicle is considered an asset of the debtor if the debtor is making the payments on the vehicle.
Regardless of the situation regarding who is on the title, the main issue we need to figure out is, “How much equity, if any, is there in the vehicle?”
Chapter 7 Bankruptcy
If you file for Chapter 7 bankruptcy and have more equity in your vehicle than you have available exemptions, then you might very well lose your vehicle.
In Missouri, the vehicle exemption is $3,000 which the debtor can be used to exempt his/her equity in multiple vehicles so long as the total exemption used doesn’t exceed $3,000. If you co-own a vehicle with somebody you only need apply your exemption to your portion of the equity. Each debtor also has a $600 wildcard that he/she can use to exempt any assets, including a vehicle … but you often need to use the wildcard to try to exempt other assets such as bank accounts and/or tax refunds so this one gets used up pretty quick. Some debtors will also be entitled to a Head of Household exemption, which is $1,250 for the debtor + $350 for each dependent under the age of 21.
In Kansas, the vehicle exemption is $20,000 per debtor which can be used to exempt your equity in one vehicle, although there might be an opportunity to exempt more than one vehicle if you drive each of them regularly. There are no wildcard or Head of Household exemptions available in Kansas.
Chapter 13 Bankruptcy
If you file for Chapter 13 bankruptcy you generally must propose to pay off your vehicle through your Chapter 13 Plan if there is a loan against it. If your vehicle is free and clear of liens and/or the equity is more than the available exemptions then you can keep your vehicle as long as you propose to pay the non-exempt portion of your equity into your Chapter 13 Payment Plan.
For many debtors keeping a vehicle doesn’t become an issue when they file for bankruptcy because either there is no equity in the vehicle or the available exemptions are enough to cover up the equity.
If you have significant equity in your vehicle, please contact one of our attorneys to find out what your options are.