At Behm Law Group, Ltd., we have often found that our clients considering bankruptcy know they could benefit from filing for Chapter 7 but balk at the idea of possibly losing some of their assets. However, the concern about losing assets is often exaggerated. The drafters of the bankruptcy code understood the need for households to hold on to some of their assets to prevent the bankruptcy process from doing more harm than good and to allow people to retain assets with which to reorganize their lives and maintain their financial security. Thus, the drafters of the bankruptcy code included various exemption laws, which are very generous, that allow people to retain assets in bankruptcy. Behm Law Group, Ltd. can help you work through the process of filing for bankruptcy in Redwood Falls, MN, including identifying which exemptions can be applied to your case.
One major concern of those entering into the process of Chapter 7 bankruptcy is the potential loss of their motor vehicle. For many families and individuals, the loss of a vehicle means the loss of any means of transportation. However, 11 U.S.C. § 522(d)(2) of the bankruptcy code allows for the exemption or retention of a motor vehicle. It is more accurate to state that the exemption allows the retention of an equitable interest in a motor vehicle rather than the retention of the vehicle itself.
The exemptible equity in your car is determined by its current market value balanced with the amount of your car loan. For example, if you own a car worth $5,000 and have a loan balance of $2,000, your motor vehicle equity is $3,000. This $3,000.00 would constitute equitable interest that would be protected by or exempted with the applicable bankruptcy exemption. It is possible to have $0 in equity if your loan is equal to the value of your car and it is possible to have a negative equity if your loan is greater than the value of your car. For instance, if your car is worth $5,000.00 and there is a $5,000.00 or $6,000.00 loan against it there would be no equity to protect or exempt with the applicable bankruptcy exemption.
The Federal motor vehicle exemption of 11 U.S.C. § 522(d)(2), among other federal exemptions, changes every three years according to economic conditions and other factors. The current motor vehicle exemption amount is $3,775. This means that if you have equity in your car less than the exemption amount, the bankruptcy trustee administering your bankruptcy case would not be able to take your motor vehicle, sell it and use the sale proceeds to pay a dividend your creditors.
In Minnesota, those filing for Chapter 7 bankruptcy have the option of choosing either the federal exemptions or the Minnesota exemptions. The Minnesota motor vehicle exemption clocks in at a maximum of $4,600 in equity. The amount increases up to $46,000 for vehicles that accommodate physical disabilities and are eligible for handicapped parking spaces (but only if changes made to the vehicle are more than $3,450).
The bankruptcy exemption laws are designed to help you find ways to keep your motor vehicle and other assets, even if you file for Chapter 7 bankruptcy relief. For more information about exemptions you may qualify for and for help with filing for bankruptcy relief in Redwood Falls, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.