Question Do I have to repair my car to surrender it to the trustee?

[LadyJuniper]

Hey, everyone! I filed for Chapter 7 and listed a car I own outright as one of my assets. I intended to surrender this vehicle as it is old and not worth the cost of buying it back, in my opinion. My son drove it and hit a dog head on and it has some body damage and has trouble accelerating. I didn't even bother to get it checked out or file a police report because I knew I'd be surrendering the car anyway. Will the trustee require me to return the car to the condition it was in when I listed it among my assets in my original filing?

[justbroke]

Welcome to BKForum.

No. This is one of the benefits of bankruptcy. You don't need to bring anything to code, or ready for inspection, or in any operable condition. So long as you didn't fraudulently destroy the property after filing on purpose, to spite the creditor, you could give them the remnants of a burned out vehicle that was destroyed in an accident. (Okay, for the accident the creditor would then go to your insurer and try to file a claim.)

Since you said it was involved in an accident, the creditor would likely seek to file a claim with your insurance company. They may or may not. Since it's old and likely not worth its salvage (junk) value, then I wouldn't fix it. The creditor may even decide that they don't want it either.

The question for me is... what is the value of the car? I'm just asking because if it's relatively low and the car still works, you may think about redeeming the vehicle instead. (Redeeming is "buying it back" but it's done at the value listed for fair market value found in guidebooks such as Kelley Blue Book, or NADA/Black's Guidebook.

[LadyJuniper]

Thanks, justbroke! The KBB value of the vehicle was around 6K - money I didn't feel like shelling out for something I already owned that wasn't in great condition anyway. The thing that I'm stuck on is that there is no creditor involved in the surrender of the car - it's just going to the trustee of my case to offset the cost of me buying back all the other crap I already own like my clothing, electronics, etc. If the value isn't the same as it was when I originally filed I'm worried that it won't bring down the total of what I owe like I'm hoping it would and I'll end up owing even more money to be done with this process. Does that make sense?

[justbroke]

I just realized that you're in Florida and I now see the issue! Florida does not have very good exemptions for anything other than a homestead. While Florida's unlimited homestead exemption allows people to keep million dollar homes, you can't quite keep a car worth more than $1,000.

If you are not claiming a home, you should have your $1,000 "wildcard" exemption and the other $4,000 unused homestead exemption. That $5K should, I hope, cover all your personal items. Did you file on your own?

[LadyJuniper]

Upon communicating with my lawyer who is in contact with the trustee of my case, I do in fact have to repair my vehicle to the condition it was in prior to the accident before they will accept the surrender. My other option is to buy it back - which would add 6K to what I will owe the trustee for things like my clothing, electronics, firearm, etc. Having only a year to pay this money to buy back the stuff I already own makes that option impossible even if I DID want to do it (I don't). Hopefully, this helps someone else. If you are surrendering a vehicle, don't drive it at all while you are waiting on the trustee to take it.

[shipo]

LadyJuniper, do you have insurance which can cover the damage to the vehicle?

[LadyJuniper]

shipo, I do! But my deductible is $1K I just took it in the shop and explained my situation to the mechanic. I told him to make it road worthy and nothing else, so we'll see if the cost of repairs come in under that $1K mark. If it does, I'm not going to bother filing a claim.

[shipo]

Good luck; keep us posted.

[justbroke]

As I wrote, the creditor will want you to file a claim with your insurer. I don't know if you can work out something where the creditor pays the deductible, but I'm sorry to hear that your deductible is so high.

[LadyJuniper]

justbroke - Thanks! That's ok, I saved money over the long run in my monthly payments by choosing the high deductible. There is no creditor in this instance, I own the car outright. There is just the trustee in charge of my assets that I am either surrendering or buying back. I am hoping to avoid the need to file a claim because I don't want my son to take a hit on his insurance premium. It is already sky-high because he's 16.

[justbroke]

It must be COVID on my brain, because I keep missing that this is an asset that the Trustee wants to liquidate. That changes the entire calculus. The Trustee will want you to file a claim with the insurer or return it back to the condition as of the day of filing. Now whether the Estate should pay for it or you should pay for it seems to be the question that your attorney answered. Your attorney believes that you must pay the to fix it.

shipo gives great advice to determine the actual repair costs.

[LadyJuniper]

justbroke my aim is to return it back to the condition at the time of filing without having to involve my insurance company if at all possible. I'll let you know how it goes. I thought of something else today as I was looking at my buy-back promissory note. Part of what I am buying back is almost $3K of "equity" in my primary vehicle. The thought that a newer vehicle that I do not actually own has equity really rubs me the wrong way, especially considering how quickly vehicles depreciate in value. I owe $20K on this car and requested a reaffirmation agreement on my car loan. My bank has not signed one or indicated that they will (when I call in my voluntary payments each month I always ask and they always say they are not looking at reaffirmation agreements in light of Covid or some such).
Theoretically, I could buy back my "equity" in this vehicle with the trustee only to have the bank repossess it whenever they feel like it. I wonder if anyone knows the particular Florida bankruptcy statute that describes how to treat equity in vehicles? That's what I'm searching for currently.

[justbroke]

It's not Florida bankruptcy law that describes equity, it's general bankruptcy law. It comes from 11 USC 541 which describes what is "property of the bankruptcy estate." It's basically what they define as "all legal or equitable interests of the debtor in property." Even if you owe money on property to a creditor, you still have some "interest" in that property. If you can't exempt that equity, then it belongs to the bankruptcy estate.

The bank would not be allowed to repossess it whenever they feel like it. The bank would have to follow normal non-bankruptcy law and you'd have to miss payments. Banks/lenders are not required to enter into reaffirmation agreements and many just don't. The only banks which seems to love re-affirmations are Ford Motor Credit, I think it's Honda Financial Services, and just about every credit union. Other lenders seem to not care so long as you're paying.

[LadyJuniper]

justbroke Thank you! Reading that the bank can't just repossess makes me feel so much better. It has been rather stressful being in car loan limbo these last several months and feeling like I'm making payments toward something I might not get to keep.

[justbroke]

Well I write that they can't, but that almost always depends on what's on your Statement of Intentions. If you put down "reaffirm" and the bank to no action to reaffirm the debt, then they are prohibited from repossession. If, however, you put down "surrender," then the bank/lender can repossess even if it takes them until after the closing of the case. I would always suggest validating the lender's position directly with their bankruptcy department.