Bankruptcy Does Not Exempt Cars Because You Need Car To Get To Work

Bankruptcy law is supposed to give the honest debtor a fresh start in life. A good job is the basis of a fresh start for most bankruptcy debtors, and most good jobs in Florida require that the employee commute by car to work as most Florida jobs are not located in a concentrated population centers served effectively by public transportation. So, common sense leads many potential bankruptcy debtors to expect that Florida bankruptcy law would protect a debtor’s vehicle required to get the debtor to his job after his bankruptcy discharge to assist the debtor’s fresh start. No so. Florida law permits debtors to exempt only $1,000 of equity in a vehicle, although debtors who do not live in an exempt homestead may get additional exemption. The dollar exemptions applied to vehicles are not waived because the debtor needs his car to get to work. There are no car exemptions based on necessity. That most debtors have difficulty financing replacement vehicles after filing bankruptcy does not increase the limited car exemptions. If your car is owned free and clear, and the car is worth more than the applicable exemption, you may lose your car in a Chapter 7 bankruptcy regardless of how much you rely on your car to earn a living.

Necessity also does not help debtors reaffirm car loans in bankruptcy. Debtors with no car equity, or equity within the $1,000 exemption, need to reaffirm car loans with the car lender in order to maintain their vehicle. When the debtor’s schedules indicate the debtor cannot afford the loan many bankruptcy courts will not permit the debtor to reaffirm the loan. The law does not give bankruptcy judges the discretion to waive the debtor’s inability to afford a car loan just because the debtor needs the car for work.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida