Article written by Columbia, SC bankruptcy attorney Daniel Stone
Many of my Chapter 13 bankruptcy clients own a boat of some type when they file. Of course they want to know what their options in regards to the boat will be in the Chapter 13 bankruptcy. It depends on a few factors. First, if the boat is free and clear, the debtor keeps the boat. The debtor however will have to pay a higher percentage to his or her unsecured creditors if their wild card exemption does not cover the boat’s equity. For example, if the boat is worth $8,000 but the Debtor only has $5,000 of wildcard exemption, the debtor would apply $3,000 towards his or her base plan to apply to the unsecured creditors (note, in this hypothitcal it maybe a little less if additional deductions are applied.
If the debtor is financing a boat and has a Chapter 13 plan that is only paying a penny on the dollar to the unsecured creditors, the Chapter 13 Trustee will most likely recommend that the debtor surrender the boat back to the lien holder. However, if the debtor has a Chapter 13 plan that pays 100% towards the unsecured creditors or at least a plan that pays a high percentage, the Trustee will be more inclined to agree to such a plan.
Finally, I tell my clients when they enter into a Chapter 13 bankruptcy that they need to see the big picture. They are potentially savings thousands of dollars. If they need to sacrifice a little by cutting out some of life’s bells and whistles for a short time, it can be well worth the pain. In addition, this is a new time for many of the these new debtors. The opportunity to begin saving money should now be the priority in their lives – not bells and whistles.