When financial troubles require filing for bankruptcy, filers in California have many questions and concerns. A typical question is whether a debtor will be able to keep all their possessions, such as their home or car. Fortunately, there are a number of exemptions that allow people to protect their assets. However, when a luxury item is involved, such as a boat, the question is more complicated. Several factors will go into determining whether a debtor can keep a boat. At The Bankruptcy Group, our attorneys are dedicated to ensuring our clients understand exactly how their bankruptcy will work. Below, our experienced Roseville, CA bankruptcy attorney discusses when and how you can keep your boat if you file for bankruptcy.
Boats in Chapter 7 Bankruptcy Cases in California
Chapter 7 is the most common type of bankruptcy in California. While Chapter 7 eliminates the vast majority of a person’s debts, the Chapter 7 trustee has the authority to take possession of a debtor’s nonexempt assets and sell them to pay a filer’s creditors. Nonexempt property consists of assets the debtor owns but is unable to protect under the available California exemptions.
How does this affect a boat? That depends on whether the boat is paid off or if the debtor still owes money on it. The boat’s equity is determined by its fair market value at the time of filing, minus any money the debtor still owes. If a debtor does not owe any money on a boat and is unable to exempt its value, the Chapter 7 trustee will likely take possession and sell it.
California offers debtors two systems of exemptions. Our California bankruptcy attorney will thoroughly review your assets and goals to determine which set of exemptions works best in your situation. If your house does not have much equity, then you will have a substantial wildcard exemption to apply to any of your assets, including your boat.
“Reaffirming” a Boat in a California Chapter 7 Bankruptcy
If you still owe money on your boat and are making monthly payments, you will most likely need a reaffirmation agreement to be approved by the court to keep your vessel. This assumes that the equity in the boat is exempt and that you can afford the monthly payments. The entity that has the secured loan on your boat would prepare the reaffirmation agreement. Under the agreement, the debtor agrees that their obligation under the contract will survive the Chapter 7 bankruptcy and that they will continue to make payments. In some situations, the terms might be different from the terms of the original agreement. The Bankruptcy Court will have to prove the agreement. It is the burden of the debtor to demonstrate that they can afford the payments and that the boat is necessary. A judge could deny the reaffirmation agreement if you are unable to prove you can afford it, and because a boat is considered a luxury item.
Keeping Your Boat Through a Chapter 13 Bankruptcy in California
A Chapter 13 bankruptcy is different from Chapter 7. When a debtor files for Chapter 13, they propose a bankruptcy plan to pay back a portion or all their debt. The length of time and the amount to be paid will vary from case to case, but a boat will typically have the same effect.
If a boat has nonexempt equity, it will not be taken by the Chapter 13 trustee and sold. However, the debtor will have to include the amount of nonexempt equity and pay it to their unsecured creditors. For instance, if there is $20,000 of nonexempt equity in a debtor’s boat, they will have to pay that amount through their plan – in addition to any other debt they are paying. The calculation is complex and varies from situation to situation. Our California bankruptcy attorney will work with you to draft a bankruptcy plan that adheres to the Bankruptcy Code. If the payments are feasible, and all other provisions of the Bankruptcy Code are met, you should be able to keep your boat.
Keeping a Boat When Behind on Payments by Filing for Chapter 13 Bankruptcy in California
When financial problems hit, they affect all aspects of a person’s life. When it is difficult to make the mortgage payment, making a payment on a boat is probably not a priority. Chapter 13 provides residents of California a way to catch up on back payments if they can afford it.
If you are behind in your monthly boat payments and in fear of losing your boat, you are entitled to pay the money you owe through a Chapter 13 bankruptcy plan. Therefore, if you can afford your monthly payments along with your trustee payment, you will be able to keep your boat and bring your loan current through your bankruptcy.
Surrendering Your Boat in Chapter 7 or Chapter 13
There are situations where keeping a boat is just not practical. If you file for Chapter 7 or Chapter 13, you can surrender your boat and, potentially, eliminate any personal obligation you have if you still owed money. While this is much easier in Chapter 7, some circumstances would allow you to free yourself from the burden of paying for a boat you cannot afford in Chapter 13. If you believe you are unable to financially keep your boat, talk with our California bankruptcy lawyer to discuss your available options.
Call Our California Bankruptcy Attorney if You Have Questions or Concerns About Keeping Your Boat
Anyone filing for bankruptcy in California will not only have questions, but they will usually have heard lots of incorrect information from friends and family members. Many debtors want a new beginning without losing all their property – especially their boat. Our Roseville bankruptcy attorneys will explain the process and determine how your boat will affect your bankruptcy. Call The Bankruptcy Group at 1-800-920-5351 to schedule a free consultation.