I recently became a parent. Among the multitude of changes that I have had to face was giving up my favorite pastime: motorcycle riding. With a new baby, I just wasn’t able to ride any more and it didn’t make sense to make payments on a bike that was sitting in the garage, gathering dust. At the risk of sounding overly dramatic (as my wife would argue), the day the new owner rode that bike away was one of the saddest I’ve had in a long time. I nearly burst into tears.
Will you lose your motorcycle if you file bankruptcy? It depends. In Colorado the vehicle exemption is $5,000 and can be applied to motorcycles. What that means is that $5,000 in equity in vehicles is protected and cannot be distributed to your creditors. If you have a car and a motorcycle, it might be hard to come within that exemption amount. If you are over that amount by a significant amount, the bankruptcy trustee is going to want the non-exempt value to give to your creditors. If that’s the case, you have two options: sacrifice one of the vehicles and let the trustee sell it (you’ll get any money back you’re entitled to with the $5,000 exemption), or you can pay the trustee the non-exempt amount that you agree on. So, if your two vehicles have $6,000 in equity, you might have to pay the trustee $1,000 to give to your creditors.
Another option is to sell one of the vehicles before you file bankruptcy. Be careful, though. It needs to be a legitimate sale, preferably to a non-related third party for the fair market value. If you try giving it to your brother-in-law, he’s going to get a letter from the trustee forcing him to give it over. You can use the proceeds of the sale for things like rent, medical bills, car repairs and other allowable things. You should talk to a lawyer before you spend it. If you pay back a loan to a family member with the money, the trustee is going to send them a letter asking for that money as well.
Can you keep the motorcycle if there is little to no equity in the motorcycle and can still make payments? There’s a good chance the answer is no. If you’ve got enough money to make to make the motorcycle payment and already have another vehicle, one of your creditors might argue that you have enough money to make payments in a Chapter 13 plan.
The bottom line is that if you have a motorcycle, you might have to come to terms with losing it. The same goes for boats, ATVs, and RV and other recreational vehicles and property. Of course, every case is different. You should consult with an attorney in your area to get answers.
If you live in Colorado and you’re wondering if you can keep your property when you file bankruptcy, we hope you’ll schedule a free, no-obligation bankruptcy consultation with us. You can schedule an appointment online or call 303.331.3403 to meet with a bankruptcy attorney.