Actually, it goes well beyond a spike in prices. Prices on used cars are downright ridiculous. There are many different theories as to why the used car market is so hot right now. However, the most important thing at our firm is how much equity our client’s used cars now have.
You may be asking yourself why a spike in use car prices is important to a law firm?
In Florida, we have a $1,000 equity exemption in a motor vehicle, per person. If a person thinking about filing bankruptcy owns their car outright, they may have a great deal of equity. So, it’s important for us to know how much equity is in their vehicle before they file bankruptcy. If, on the other hand, a person has a creditor, who holds a lien on the vehicle, a spike in the price of used cars may create additional equity in a vehicle that wasn’t there several months ago. This can create problems for the person when they file Chapter 7 bankruptcy.
Filing a Chapter 7
When a person files for Chapter 7 bankruptcy, a bankruptcy trustee is put in place to stand between them and their creditors. The trustee is not your friend, but he is there to make sure both sides play fairly and follow the rules. The trustee’s job is to look for equity in assets that are not protected (i.e., not exempt). If there are any non-exempt assets in the debtor’s estate, the trustee must corral the non-exempt assets and sell them. Once the trustee has reduced everything to cash, the cash can be distributed to the debtor’s creditors.
What this really means is that a person who is thinking of filing for bankruptcy protection and who owns a 2010 Ford F-150 with 100,000 miles on it now, might have problems exempting the full value of this used vehicle. In the past, the person could have listed the car at $1,000 and the bankruptcy trustee would have accepted that valuation. In today’s market, the Chapter 7 trustee may want the debtor to take the car to Carmax and see what Carmax would pay for the used car.
The Bottom Line
When you’re thinking about filing for bankruptcy, it’s very important that your attorney be in tune with the bankruptcy code and was going on outside of the office in today’s economy. Here at The Dellutri Law Group, we believe it is the attorney’s responsibility to make sure that our clients are crossing all the T’s and dotting all the I’s. If you have any questions about vehicle valuations or filing for bankruptcy please reach out to The Dellutri Law Group. We offer a complementary strategy session to anyone who is having financial problems.