Bankruptcy Law Blog

Monday, May 1, 2017

Can I Keep My Boat If I File For Bankruptcy?

According to estimates from the U.S. Coast Guard, over 25% of all Alabama residents go boating each year, and almost one fifth of the state lives in a household that owns some type of boat. Boating is a fun, family-friendly activity, and for many people in our state it’s the way they feed their family or earn a living. So, it should come as no surprise that a lot of potential bankruptcy filers are worried the government will seize their boat if they file for bankruptcy.

The good news is that a lot of bankruptcy filers have a say in whether or not they keep their boat, just like they get to decide if they want to keep their car and stay in their current home. Below are a few examples of different tactics you can try if you really can’t imagine giving up your boat.

Filing Under Chapter 13

When most people think about bankruptcy they are thinking about Chapter 7 bankruptcy. Under Chapter 7, assets are liquidated to pay off debts and most of the debts that remain are forgiven. But there is a newer type of bankruptcy that is really different from this.

When a debtor files for bankruptcy under Chapter 13 instead of Chapter 7, he or she gets to decide which assets to liquidate and which to keep. All remaining debt is consolidated, loan terms are often renegotiated, and the debtor agrees to a payment plan that lasts for 3-5 years. At the end of the repayment period, a lot of debt is paid off and the debtor is in a much better financial situation.

If you want to keep your boat, you could file under Chapter 13 so long as a repayment plan is a realistic solution for you.

The Homestead Exemption

If you live on your boat, and you have no other property that would be considered your home, you can typically exempt the boat from liquidation. If you go this route, be prepared to live on your boat long-term, not just while the court is investigating what assets you own.

Exempt It

If your boat is not worth a ton of money, you may be able to “exempt” it from liquidation in a Chapter 7 bankruptcy. Every filer gets a certain dollar amount that they can use to “exempt” items they own from liquidation. Depending on how much your boat is worth, you may be able to “exempt” it. Keep in mind that “exempting” the boat is going to mean other property or assets will be liquidated instead of the boat.

Wait And See What Happens

If your boat has mostly sentimental value, and would not bring very much if sold off by the court, the court may allow you to keep it because it is not worth the hassle of dealing with it. It is hard to predict when a court will decide to do this, so if you really want to make sure you get to keep your boat, this is a risky move.

We Love Boaters

If you have questions about what will happen to your boat if you file for bankruptcy, or any other bankruptcy-related questions, please feel free to contact our office for a FREE initial consultation.

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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”

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