A common question for those who are considering filing Chapter 7 bankruptcy is whether or not the court will use your motor vehicle to help pay off your creditors. To answer that question, we must look at several issues, including the equity (value) of your motor vehicle and the specific laws regarding bankruptcy exemptions.
In Massachusetts, you may be able to keep your vehicle if you have already paid it off and its market value is less than the state exemption limit. If you are still paying on your vehicle, you may still be able to keep it, however, you will need to file additional paperwork with the court and with your vehicle lender. There are many avenues available that need to be explored in this area and you need to seek a competent experienced bankruptcy lawyer to help determine what is in YOUR best interest.
First Steps in Vehicle Exemptions
Determine the equity in your vehicle. You can determine the market value of your vehicle through websites like Kelly Blue Book (www.kbb.com) by answering questions about the make and model, year, and current condition. Compare the estimated market value of your vehicle with Massachusetts exemption amount of $7,500 for those under the age of 60. If you are over the age 60, or if you are disabled, the exemption amount goes up to $15,000.
If you are still paying on the vehicle, then subtract how much you still owe on the vehicle from its current market value to determine if its equity is lower than the exemption amounts. If the vehicle has no real equity, then the court will not take your vehicle. If you are still paying on your vehicle, keep in mind that the lender can repossess the vehicle unless you either pay off the vehicle or sign a new loan agreement. Each Debtor’s circumstances needs to be evaluated on an individual bases, only after careful attention to YOUR case will we be able to determine what exemptions will be the best for you.
Federal Motor Vehicle Exemption
According to Massachusetts bankruptcy law, a consumer filing for Chapter 7 bankruptcy protection may use the state exemptions or federal bankruptcy exemption of $3,450.
Massachusetts Wildcard Exemption
Massachusetts allows consumers filing for bankruptcy a $1,000 wildcard exemption that can be used for any personal property. What’s more, debtors can pool their unused ‘tools of the trade’ exemption or ‘furniture’ exemption, up to $5,000, towards their motor vehicle equity also.
Motor Vehicle Exemptions for Spouses, Seniors and the Disabled
Under Massachusetts bankruptcy laws, married couples are individually provided with motor vehicle exemptions. This means that both spouses are allowed $7,500 in exemptions for one motor vehicle. Debtors who are disabled or over the age of 60 are entitled to a motor vehicle exemption in the amount of $15,000.
Married couples who are considering filing for bankruptcy should contact an experienced bankruptcy attorney to help them determine if a joint or separate bankruptcy petition is correct for their specific situation.
The motor vehicle exemption can be applied towards the equity in any motor vehicle that is used to get you back and forth to work, personal transportation, or used while looking for work.
The motor vehicle exemption laws do change from time to time. The most recent changes made to debt collection regulations occurred in 2010. More information about Massachusetts debt collection laws can be found online at the Commonwealth of Massachusetts.