How close (or far) can you be from exemption amount?

[pcn]

How much "cushion" is there between the exemption and the actual value? For instance, your state has a 3k vehicle exemption, but you have 5k equity in your vehicle. There are costs involved in taking your vehicle, selling your vehicle, and the paperwork involved. At some point does the trustee decide that it is not worth the time and money to recover a small amount? (What is small?) Or, is there a legal guide that they must abide by in making that determination?

[justbroke]

There is no cushion. It's dollar for dollar. The Trustee could care less what it costs. if they can take your $5K car and make $500 from it... they will.

Now, you're right that there is some point in which the Trustee won't make any money. However, don't bet on this. It is typical for the Trustee to abandon some property that is otherwise worthless due to the costs associated with selling the property. I would not, though, use this as a strategy. The Trustee could still "ask" (or demand) that you pay him/her the difference.

[HHM]

Legally, there is no cushion; if the vehicle is worth more than the exemption, then there is non-exempt equity and it must be addressed. So the negotiation takes place over the value of the item of property and how much the trustee could really get for the item.

For example, if your state exemption is $3K, and the NADA Fair Condition value is $5,000; the trustee might get $3,500-$4,000 at auction for the vehicle. Thus, you would offer the trustee $750 to buy out the non-exempt equity. The trustee will typically give you up to 6 months to make payments and will probably require you to turn over the title in the interium.

In a situation like yours, you might benefit from taking your car to an automobile auction service and see what they appraise it at. If the auction value is worth less than the exemption, you should be prepared to demonstrate that.

[MSbklawyer]

Practically speaking though, unless there is enough non-exempt equity to make the sale of the property and thus the recovery of that equity economically practical, the trustee will simply abandon the equity back to the debtor.

For instance: You own a free and clear car that books out at $6000 and your state allows a $5000 car exemption. To get at that $1000 in non-exempt equity, the trustee has to sell the car. The nominal equity would be in large part consumed by the costs of the sale.

[pcn]

MSbklawyer, that is basically what my lawyer has said, with the added disclaimer that we will just have to wait and see what happens (in so many words). I have 4k-8k equity in a truck, based on who you believe for the value. Our exemption is $3,500 so if I can agree successfully that it is 4k equity there is a good chance nothing will come of it. If, on the other hand, they can convince the judge (or trustee?)that the value is the high value, I would have 4.5k unprotected. Part of my concern is who gets to make the final call on the value. My brother in law is a used car dealer and tells me the low side is accurate. What happens if I call their bluff and say I am unwilling to pay the difference, and it wont bring the high $? Can I get it back somehow, or is there no way to really negotiate the value? If so, what prevents them for over-valuing just to get the debtor to buy back their vehicle?

[MSbklawyer]

MSbklawyer, that is basically what my lawyer has said, with the added disclaimer that we will just have to wait and see what happens (in so many words). I have 4k-8k equity in a truck, based on who you believe for the value. Our exemption is $3,500 so if I can agree successfully that it is 4k equity there is a good chance nothing will come of it. If, on the other hand, they can convince the judge (or trustee?)that the value is the high value, I would have 4.5k unprotected. Part of my concern is who gets to make the final call on the value. My brother in law is a used car dealer and tells me the low side is accurate. What happens if I call their bluff and say I am unwilling to pay the difference, and it wont bring the high $? Can I get it back somehow, or is there no way to really negotiate the value? If so, what prevents them for over-valuing just to get the debtor to buy back their vehicle?

[adviceplease]

What happens if the rest of the value of the vehicle falls under left over homestead exemption on federal or a wild card?

[justbroke]

What happens if the rest of the value of the vehicle falls under left over homestead exemption on federal or a wild card?

Then, by definition, the vehicle is exempt.

[Pizza]

The best "cushion" you can have is probably mine. A junker car, a leased vehicle, and a house full of 'junk'...

[swampwiz]

I'm curious. My car has about $2200 of body damage that I had not fixed (folks hitting me.) I lost the paperwork, but I'm sure I could contact the insurance companies to get it again. Would this be taken directly off the value?

NOTE: I think this is a moot point since the exemption in my state is $7500 and my car has a retail value of $8300, which should mean an auction value of well below the exemption.