married with 2 cars - each jointly owned

[deadbeat]

Hi all. I'm a longtime lurker and this is my first post.

My wife and I will likely be filing a joint Chapter 7 BK in Illinois before year end. We own (with no loans) 2 cars that are titled in both of our names as joint owners. They are both "clunkers", so I WAS pretty sure that we would be able to save them both as they would fall under our state exemption amounts (they are each worth about $2400). That is, until I read the Illinois automobile exemption statute, which exempts:

"The debtor's interest, not to exceed $2,400 in value, in any ONE motor vehicle" [emphasis added by me]

This is scaring me, because I am afraid the trustee might interpret the statute this way:

1. Each of us owns 50% of 2 cars, so we each have $1200 of equity in Car A and $1200 of equity in Car B.
2. We could both combine (double) our exemptions in Car A to protect it with no problem.
3. We would stand to lose Car B (or have to use our wild card exemption to save it) because we already protected ONE car.

By this analysis, we would be able to save both of our cars only if Car A was titled solely in my name and Car B was solely in my wife's name, thus giving each of us $2400 in equity in ONE car. But we can't just re-title the cars now because (I believe) the fraudulent transfer look-back period in Illinois is FOUR years(!)

Somebody please tell me that I am over-thinking this.

[deadbeat]

...assuming we can double our exemptions in Illinois

Of course, the above analysis assumes that a married couple filing a joint Chapter 7 can double their automobile exemptions in Illinois. I found a thread that says we can (http://www.bkforum.com/showthread.ph...light=illinois), but I don't see support for this anywhere in the statute itself.

If we can't double our exemptions AND if my 50%-equity-in-jointly-titled-cars fears are true (see my prior post), it would mean that I could only exempt $1200 of Car A and my wife could only exempt $1200 of Car B, thus leaving $1200 of unprotected equity in each car.

We really need both of our crappy little cars. If we lost one (or both!) of them, we would be in deep doo-doo!

[lrprn]

Of course, the above analysis assumes that a married couple filing a joint Chapter 7 can double their automobile exemptions in Illinois. I found a thread that says we can (http://www.bkforum.com/showthread.ph...light=illinois), but I don't see support for this anywhere in the statute itself.

I don't think you can double the $1200 in each car auto exemption in Illinois. (Although you can clearly double the homestead exemption.)

However, IL also has a $2K wild card per person that can be doubled which means you can protect up to $1400 on each car.

Have you gotten a fair market estimate of the value of both cars from a reliable source that matches the value of the car to its condition and mileage? You might be surprised how little your "crappy little cars" are actually worth.

We really need both of our crappy little cars. If we lost one (or both!) of them, we would be in deep doo-doo!

Even if both cars' equity can't be completely protected with $1400/car, it's still possible to make a deal with the trustee to pay back the difference (true market value of each car minus $1400 x 2) to the court over a specified period of time before your case would be discharged. That could be Plan B.

Plan C could be to sell one of the cars for actual market value now, use the cash to buy a cheaper car for no more than $1400, then spend down whatever extra cash can't be protected by your IL exemptions to pay for acceptable things like medical or dental car, car repairs, home repairs, etc. Once the new car is purchased and the money spent down, then file. This way you only have to pay the trustee back for the extra equity in one car. That could be Plan C.

Just trying to think creatively (but legally) here

This is a great discussion to have with 3-4 bankruptcy lawyers in your area when you set up your free initial consultations.

[deadbeat]

I don't think you can double the $1200 in each car auto exemption in Illinois. (Although you can clearly double the homestead exemption.)

I hope you're wrong, but I'm afraid you're right about no car exemption doubling in IL.

But when you refer to the "$1200 in each car auto exemption", are you referring to my (assumed) 50% equity interest in each car or to the statute's exemption amount? The reason I ask is that the Illinois statute used to only exempt $1200 of equity in a car, but the exemption amount was increased last year to $2400. http://www.ilga.gov/legislation/ilcs...l+Procedure%2E

However, IL also has a $2K wild card per person that can be doubled which means you can protect up to $1400 on each car.

It sounds like you (unfortunately for me) agree that a joint owner's interest is valued at 50% of the total equity. But I don't understand your math. Would you please explain how you came up with a potential $1400 exemption per car? Again, the IL exemption statute has been changed and the wild card exemption was increased to $4000.

Have you gotten a fair market estimate of the value of both cars from a reliable source that matches the value of the car to its condition and mileage? You might be surprised how little your "crappy little cars" are actually worth.

I got my current estimated values from KBB but I had planned to take both cars to CarMax for a free appraisal right before we filed (to avoid the appearance of pre-BK planning, which although legal may raise trustee eyebrows). But maybe I should go ahead and get the estimates now? Anyway, I'm going to keep my fingers crossed for low valuations. Never imagined that one day I'd want my cars to be worthless.

Even if both cars' equity can't be completely protected with $1400/car, it's still possible to make a deal with the trustee to pay back the difference (true market value of each car minus $1400 x 2) to the court over a specified period of time before your case would be discharged. That could be Plan B.

So in this example, if the cars are worth $4800 combined and their combined exemption is $2800, we would need to pay $2000 to the trustee for the right to keep our crappy cars. Yikes! We could probably buy a "new" crappy car for $2K.

Plan C could be to sell one of the cars for actual market value now, use the cash to buy a cheaper car for no more than $1400, then spend down whatever extra cash can't be protected by your IL exemptions to pay for acceptable things like medical or dental car, car repairs, home repairs, etc. Once the new car is purchased and the money spent down, then file. This way you only have to pay the trustee back for the extra equity in one car. That could be Plan C.

So does Plan C call for only one of us to take title to the "new" crappy car so that: (for example) Husband would have 100% equity in "new car" and thus Husband's exemption would fully protect "new car"; and (2) Wife still has 50% equity in the remaining "old car" to protect half of its equity?

Just trying to think creatively (but legally) here

This is a great discussion to have with 3-4 bankruptcy lawyers in your area when you set up your free initial consultations.

You're awesome lrprn!!! Thanks for your ideas!

I will definitely be discussing these options during my initial attorney consultations (and picking a good attorney is a whole other issue to stress over).

[deadbeat]

Plan C could be to sell one of the cars for actual market value now, use the cash to buy a cheaper car for no more than $1400, then spend down whatever extra cash can't be protected by your IL exemptions to pay for acceptable things like medical or dental car, car repairs, home repairs, etc. Once the new car is purchased and the money spent down, then file. This way you only have to pay the trustee back for the extra equity in one car. That could be Plan C.

I read somewhere that you have to wait (6 months?) after purchasing an asset before filing Ch. 7. And I guess the trustee might want to know why we decided that only one of our names would appear on the title to the new car. [sigh]