If the Trustee takes my car as an asset - can I get cash?

[sh9730]

Hi there,

I was just thinking, and I may be WAY off, but thought I would ask. As some of you may have read in other threads, I have two cars in my CH7 filing. One was intended to be surrendered, one was to be reaffirmed.

Because of some possible lien perfection issues, the trustee MAY get to keep/sell one or both of these cars (I wont go into all the details again here...read my other posts). Both cars are upside down...

BUT, if the trustee somehow does deem these to be UNSECURED assets (due to the lien issues), and then sells them....does that mean I would be entitled to some sort of auto exemption? I didnt claim this of course because there was no equity in either car and they were secured. But I was thinking that if the TRUSTEE thinks they are unsecured and have value, would that mean that in essence it is as if I own these outright and the lender would just have to get their share AFTER exemptions like anyone else?

Or am I way off base?

Thanks.

[HHM]

You ALWAYS need to claim the exemption, even if there is no equity. This issue may be 1 reason the trustee is fighting it, you didn't claim any exemption.

Immediately amend your petition to claim the exemption.

But yes, in general, if a trustee takes an asset that has exempt and non-exempt equity, you get a check for the exempt portion when the trustee sells the asset.

Basically, the payout of a sold assets works as follows.
1. Secured creditor (lien holder) if any
2. Exempt amount to debtor, if any
3. the rest to the BK estate for distribution to unsecured creditors.

[sh9730]

You ALWAYS need to claim the exemption, even if there is no equity. This issue may be 1 reason the trustee is fighting it, you didn't claim any exemption.

Immediately amend your petition to claim the exemption.

But yes, in general, if a trustee takes an asset that has exempt and non-exempt equity, you get a check for the exempt portion when the trustee sells the asset.

Basically, the payout of a sold assets works as follows.
1. Secured creditor (lien holder) if any
2. Exempt amount to debtor, if any
3. the rest to the BK estate for distribution to unsecured creditors.

OK, I guess I ll look at my paperwork in detail....my attorney did it all, and an expemtion for a car never came up in our discussions because initial impressions were there was no equity to exempt. He may have claimed it. Is claiming this a LEGAL requirement, or you say it should always be claimed just for this sort of anomaly? If it was legal my attorney probably claimed it....their office did a good job on the paperwork and the trustee didnt ask about any of it...but I will double check.

So, just so I am crystal clear, even though these were orignally SECURED assets (actually one is a lease and thats an entire different story on whether he can keep that as an "asset" but that discussion is in my other posts), but if somehow he deems they were never LEGALLY secured (via lien perfection), then I would in fact be entitled to my exemption and the lender could not come after me for that money through some back door?

Thanks.

[sh9730]

Ok, I looked at my petition.

Again, I have two cars - one is a purchase agreement that I originally intended to surrender. To date the Trustee has not filed any paperwork to keep this car in the estate, nor however has he filed a Report of No Distribution. It has been 45 days today since my 341 hearing. This vehicle is listed in my Schedule B, but NOT in my Schedule C with an exemption amount.

The second car is a LEASED vehicle. The trustee DID file a motion to keep this as part of the estate, but only AFTER my reaffirmation agreement was filed with the court. This vehicle is also listed in my Schedule B, AND my Schedule C with an exemption amount of 2749.00 (I thought it was 5K in AZ, but I could be wrong).

SO, HHM, do I need to amend my petition? Or since the purchased vehicle was originally intended to be surrendered, is that why it is not on my Schedule C? Again, at this point the trustee has not filed any motion to keep this car, but the stupid bank wont take it back either since they are worried about this lien issue and dont want to go through expense of repoing, only to have trustee take it back. They are waiting for the official report of no distribution, or the abandonment of this particular asset before they will come get it...even though it has been 45 days since my 341. Can the trustee come still come after this asset at this point? And as I had indicated my intention to surrender, if he does find this is part of the estate, will I be entitled to the exemption? If so, do I need to amend Schedule C?

On the second car I think Im ok except for the expemption amount is only 2749.00? But I think this one is a long shot for him anyway since it is a leased vehicle. Im pretty sure the lender is going to fight this if he doesnt eventually abandon it.

Thanks so much.....I feel kind of wierd even GETTING any cash from the exemption if any of this were to work out, since it is a legal technicality that will cause it to occur (not filing timely lien on vehicle in AZ), but I d be lying if that money wouldnt help!

[AngelinaCatHub]

I am sure the money would help or you would not be here. However, in Court technicalities as in typographical errors are often amended by a Judge as the intent as well as procedure is a proven procedure and corrected. You would lose is my bet. It would be tantamount to a bank sending you a million dollar check in error. Check is good but using it is not. 'Hub

[sh9730]

Angelina,

I might not be explaining well, but what I am talking about is not a technicality....the TRUSTEE may be taking advantage of a technicality in that the lien(s) were not perfected correctly, allowing him to take the vehicle(s) into the estate, avoiding the lien by the lenders....but these actions have already occurred and apparently approved by the BK courts in our jurisdiction...

SO, what I believe HHM was saying, and I am trying to confirm, is that IF the trustee IS able to keep one or both of my vehicles to sell to repay creditors (thereby making my lender(s) unsecured creditors), in essence those liens were never in place...so basically I did own the cars...therefore would be entitled to the exemption amount...right?

Its not something I was expecting at all, and if it doesnt happen, no biggie....but it does seem like it might be a wierd LEGAL quirk in the way this works since the trustee is using that wierd technicality (untimely lien perfection) to get posession of the vehicles for the estate in the first place....

[HHM]

First, if the car is leased, you do not own it. There is NO WAY the trustee can go after a vehicle that is leased. This aspect of your scenario makes no sense.

On the other vehicle, you "own" the car regardless of the lien. The lien is merely a security interest in the vehicle, but you "own" it, it is your property (a lease, in contrast, you do not own the property, the leasing company owns it). Trustee's will look closely at the filing of liens on vehicles to make sure they were done properly. If the lien was not done properly, then the lien is void thereby extinguishing the security interest. When that occurs, usually both the debtor and the secured lender get screwed because the equity will usually exceed the exemption and the secured lender is now just a dischargeable unsecured creditor.

[sh9730]

HHM,

Thank you again. I understand and tend to agree about the leased vehicle aspect. None the less, the leased vehicle IS the vehicle he filed the motion against to keep it as part of the estate - thereby delaying the approval of my reaffirmation agreement (assumption) on that car.

To date he has NOT filed any paperwork on the other vehicle and we are now past 45 days since the 341 so Im not sure he even can at this point. My personal feeling is THAT part is an error on his part (i.e. he meant to file against the purchased vehicle within the 45 days, but picked the wrong car from my paperwork - ESPECIALLY since that purchased vehicle is the one that has some real potential lien filing issues - see other posts if you are interested).

But your last sentence is more what I was asking in THIS post....originally you seemed to say that maybe I would be titled to the exemption if either/both of these vehicles are sold by the trustee....but in your last post you say the debtor also gets screwed?

Again, this was just a curiosity question more than anything else....I dont have any interest in illegality...I guess I ll just wait and see what happens next.

Thanks again.

[keepsmiling]

HHM, just curious what percent of the time that happens? (imperfectly secured lien) and ... what exactly must be done to make it "perfect"?

[sh9730]

OK - just an update for anyone who cares - I ll probably update a couple of threads with this information since I was dumb and there is some overlap on a few of them.

I was contacted by an attorney's office associated with my Trustee. They were looking for information on one of the vehicles.

It turns out they HAD subpeonad (sp) the Motor Vehicle department on both cars in an effort to perfect the lien(s). They rec'd a response on the PURCHASED vehicle, and although the lien was in fact "untimely perfected', BUT BUT BUT, it did not fall within 90 days of my BK filing so it was not within the "preference period" and this attorney will be suggesting that the Trustee abandon this asset. Although I still dont understand this "preference period" completely yet, this is a good thing as this is the vehicle I have been trying to surrender, and now that they are done with it, I can get the lender to finally take it back!

As for the LEASED vehicle, they never got a response from Motor Vehicles, hence they were contacting me to get information on where I purchased it so they could investigate that way. I of course provided the information, but as a little side thing I mentioned I was surprised they were trying to check on this car since it was a lease. She emailed me right back and said she was UNAWARE it was a lease, and would not be pursuing it unless the Trustee directed her to do so (which she didnt think was likely). She is fairly sure that once she gets approval from the Trustee, she will withdraw the Motion to Maintain Stay, and then my reaff (assumption) agreement can move forward as normal, although the judge probably wont APPROVE the reaff anyway...but at least then I can do the ride through since my lender has said as long as I ve made every effort to reaff, they will let me keep the car.

SO, one more thing checked off the list I hope! And as least as far as this post is concerned, I wont need to worry about the exemption part of things!

[HHM]

HHM, just curious what percent of the time that happens? (imperfectly secured lien) and ... what exactly must be done to make it "perfect"?

Not that common. It really depends on state law and the rules for perfecting liens. The rules for cars tend to be very technical/procedural with specific time lines for filing certain documents, if the rules are not followed to the letter by the lender or dealership, the lien can sometimes be voided. Although major lenders sometimes screw up the time lines, the issue arises more commonly when the financing source is a family member or relative.

[AngelinaCatHub]

Hey hs9730 as well as HHM. I enjoyed this thread and learned a bit. Thank you both and all. 'Hub

[sh9730]

Thanks and welcome. Also, I should clarify, I understand the general concept of "preferential period" and payments, Im not exactly sure how it worked in this situation. I guess they are saying since I bought the car more than 90 days before filing, that is when a "payment" was made, and the fact that the lien was not timely filed didnt overrule the fact that I bought it over 90 days past. Like I said, I dont totally get it in this context.

But Im just glad its over. As my other new post says - shortly after this email exchange my Trustee filed report of no distribution. So both vehicles abandoned and I can move on!

[calhoun2011]

I am in Arizona and confused about my vehicles also in our Chapter 7 - my husband is disabled and owns outright an old chevy with over 150,000 miles - worth about $4,000 - we have a loan with a credit union on a 06 vehicle which we are attempting to reaffirm with the credit union. I am concerned the trustee may not allow the reaffirmation - has anyone had experience with this problem - we are post 341 hearing.

[HHM]

I am in Arizona and confused about my vehicles also in our Chapter 7 - my husband is disabled and owns outright an old chevy with over 150,000 miles - worth about $4,000 - we have a loan with a credit union on a 06 vehicle which we are attempting to reaffirm with the credit union. I am concerned the trustee may not allow the reaffirmation - has anyone had experience with this problem - we are post 341 hearing.

1. The trustee is not involved in the reaffirmation, (also, you should reconsider reaffirming, never a good idea unless you absolutely must do so).
2. Unlikely any "old" Chevy with that many miles is worth $4,000 in any event, none of this should be an issue so long as you have enough of an exemption to cover the equity in both vehicles.