One of the first things that many people consider when contemplating a bankruptcy is the effect the filing will have on any vehicles that may be co-owned by their children, or registered in the parent’s name on the child’s behalf. There are many reasons that we might find ourselves co-signing on a vehicle for our children. Often, a child may still be a minor when a vehicle is purchased preventing them from registering it in their own name on the title. Conversely, a parent may also co-sign on a vehicle for one of their adult children for the purpose of assisting with the financing process. Regardless of the reason however, the ultimate result is that the parent will be included on the title to the vehicle, and if applicable, will be co-signed on any loans taken out to finance it.
Because of this, the parent will have an ownership interest in the child’s vehicle, as Minnesota law stipulates that title establishes ownership. For anyone contemplating bankruptcy who has such an interest in their child’s vehicle, they will naturally wonder whether the bankruptcy will affect the vehicle, to what extent, and how the bankruptcy process can be molded to navigate around it.
Due to the fact that the parent’s name is attached to the vehicle, this interest must be disclosed in the bankruptcy petition when it is filed. However, this does not mean that the child will lose the vehicle. In many instances, equity in the vehicle can be protected using the exemptions available under the bankruptcy code (special protections that exist to safeguard many types personal property during bankruptcy). In a situation where any equity that the parent has in the vehicle can be protected by the bankruptcy exemptions, then there should be no issue with their child keeping the vehicle!
Even in circumstances where there may be a small amount of equity in the vehicle that is non-protected, you will typically still have the option to pay the bankruptcy trustee the difference between the total amount of equity and the amount of it that you can protect, and your child will be still be able to keep their vehicle!
Conversely, if you are in a Chapter 13 plan and you are titled on a vehicle belonging to your child, the equity in the vehicle will usually be protected through the payments being made into the Chapter 13! Moreover, if ongoing payments are being made on a loan for a vehicle, your child will typically be able to continue the payments to the lender directly! In speaking with your bankruptcy attorney, they will advise you on the ways in which your Chapter 13 can be structured to protect a vehicle belonging to your child.
In Minnesota, title to a vehicle is generally determinative of ownership, meaning that if you are on the title to a car belonging to your child, you are also the co-owner as well. However, this does not mean that the vehicle cannot be protected as you navigate the bankruptcy process however; our firm are experts in analyzing the ways in which a vehicle can be protected and preserved through bankruptcy, and we would love the opportunity to speak with you about it.
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When the time is right, or when you are ready, please don’t hesitate to reach out to Minnesota’s most kind and helpful bankruptcy law firm by going now to www.lifebacklaw.com.
