Filing for bankruptcy is a surprisingly normal experience. Virtually everyone keeps their possessions including their house, cars, furniture, and retirement plans.
This is accomplished through a part of the United States Bankruptcy Code called exemptions and luckily, the exemptions are generous.
I have a potential client with whom I’ve been speaking for quite a while. He's a nice guy who doesn’t own a lot of stuff. His house is modest and he doesn't have a lot of household items. But he has a loss of income that has caused him to struggle financially.
And there is another matter: He has a classic Corvette.
Keeping the ‘Vette
I’m a car guy. I love cars and motorcycles and I read all of the magazines, and imagine how life would be if I could only buy one of these.
I have chosen instead to invest in my children’s educations, so my lust for cool vehicles is limited to an old Saab convertible that is worth considerably less than five figures.
I told the potential client he has to get his Corvette appraised. He hasn’t done this yet, but both of us know that it will be appraised at north of $20,000. That means if he files for bankruptcy, the Trustee for his case will sell the car.
What Can You Keep in Bankruptcy?
Will he be able to keep anything from the sale? The bankruptcy laws that we use in Pennsylvania allow a filer to keep equity in one vehicle in the amount of about $4,000. In some cases, the client will also have a wild card exemption that could add another $10,000 or so to this amount. My client does not have the wild card available to him as he needs all of his exemption money to keep his house.
What about transferring the vehicle to someone else’s name? No, that would be fraudulent. What about selling it to a friend or relative? You can do this if you get the fair market value for the vehicle. But now you have the cash from the sale, and I will not be able to protect any of the cash in this particular case.
In this case, my client can get $4,000 if the trustee sells the car, nothing if the client sells the car.
So what is my Corvette-rich client to do? It's his call. He can continue to suffer with his debt, and soon one of his creditors is going to sue him and win. And when they win, they will take his Corvette. Or he can end his suffering and just file the bankruptcy, get out of debt, and move on without the classic Corvette that he can't afford to keep.
It’s an unfortunate situation, but I am thankful that the bankruptcy laws allow virtually all of my other clients to keep all that they have and everyone an opportunity to start over financially.
Have questions about your possessions in a upcoming bankruptcy? Visit the experienced Pittsburgh attorneys at Steidl & Steinberg for your free consultation today.