In a Chapter 7 bankruptcy, a debtor is able to pay the value of a vehicle in Miami, Ft Lauderdale or Palm Beach county, at any time after the trustee abandons his/her interest in that vehicle. A Chapter 7 trustee in Miami, Ft Lauderdale or Palm Beach County will abandon his/her interest if more money is owed on the vehicle than it is worth.
Once the vehicle is abandoned by the Chapter 7 bankruptcy trustee, the Debtor may file what is called a motion to redeem the vehicle. This is allowed under U.S. Bankruptcy Code Section 722. When you file the motion to redeem the vehicle in Miami, Ft Lauderdale or Palm Beach county, the bankruptcy court will schedule a hearing to determine the value of the vehicle. Once that value is determined, either by the bankruptcy judge or by agreement with the lawyer for the finance company, the Debtor will be required to come up with the amount determined by the Bankruptcy court immediately. So if you have a car that is financed for $35,000.00, and the Bankruptcy court in Miami, Ft Lauderdale or Palm Beach county decides the value is $25,000.00, if you pay the $25,000.00 immediately to the finance company, they must get you the title to the vehicle immediately. However, this is only for a vehicle that is used primarily for personal, family or household use. If the primary use is for business, then the vehicle cannot be redeemed. This is obviously an uncommon motion in the Bankruptcy courts in Miami, Ft Lauderdale or Palm Beach county because of how much a Debtor would have to immediately pay to the finance company.
The more common mode of stripping a lien on a vehicle is in a Chapter 13 Bankruptcy in Miami, Ft Lauderdale or Palm Beach county. The rules in the Southern District of Florida, which include Miami, Ft Lauderdale and Palm Beach county, require that you have either owned the vehicle for at least 910 days or that the vehicle is not primarily used for personal use of the Debtor or the financing agreement finances more than just the vehicle. So if the vehicle is purchased by the debtor, but is primarily used by the Debtor’s spouse or child, it can be stripped down to its value. Also, if the financing agreement secured more than just the vehicle, the Debtor would be able to strip it down to the value of the vehicle. Additionally, the interest rate can be reduced to two points over the prime interest rate. Right now, as it has been for a while, the prime interest rate is 3.25%. Therefore, when you strip the value of the car or just put the repayment of the car in the plan to repay, the present interest rate would be 5.25%. Another option would be to repay the car in the plan for up to five years in Miami, Ft Lauderdale or Palm Beach county. The Debtor would do this if he/she had a very low interest rate to begin with. So if the Debtor has an interest rate of say 2%, but there is only three and one half years left to pay on the vehicle, you can repay the vehicle back at that same interest rate over the full five years of the repayment plan. This works really well when your repayment plan has just the vehicle and unsecured debt (credit cards and/or medical bills etc.). Also, if there is equity in the car and the interest rate is low, in Miami, Ft Lauderdale or Palm Beach county the Debtor may be able to pay just the prime rate which now is 3.25%. So if you can’t strip the vehicle and there is equity in the vehicle, you can repay the vehicle through the repayment plan at 3.25% interest. Usually, if you file a Chapter 13 in Miami, Ft Lauderdale or Palm Beach county, if it’s just a repayment of unsecured debt, your plan can be as low as $200.00 for three to five years. But if you include your vehicle, the unsecured creditors could split as little as $5.00 a month. So, if the Debtor is going to include their vehicle, the unsecured creditors will get less money so that your vehicle can be paid through the plan. When a Chapter 13 Bankruptcy is filed in Miami, Ft Lauderdale or Palm Beach county, the attorney who represents you must look at your entire financial picture. Sometimes, the best option is to include the vehicle in the Chapter 13 repayment plan in Miami, Ft Lauderdale or Palm Beach county. Other districts may require the inclusion of all secured debts, like a vehicle loan or a mortgage on real property. In Miami, Ft Lauderdale or Palm Beach county, this is the option of the Debtor.
Mortgages are also subject of stripping pursuant to the U.S. Bankruptcy Code. On homestead property in Miami, Ft Lauderdale or Palm Beach county, the Debtor is able to strip off a second mortgage, third mortgages or Association arrearages. In order to do this, the Debtor must show there is no equity in the property after the payment of the first mortgage and any past due property taxes. If there is $1.00 in equity, the mortgages or liens cannot be stripped. Appraisals must be done and expert witnesses who performed the appraisals must appear in Bankruptcy court to testify as to their opinion of the value of the property. The Bankruptcy judges in Miami, Ft Lauderdale or Palm Beach county will generally pick a number somewhere in the middle of the Debtor’s appraisal and the lender’s appraisal. If that number shows there is no equity after the payment of the first mortgage and any past due property taxes, the later filed liens can be stripped off and avoided.
Weirdly, on investment property the equity test doesn’t matter. You can even strip the first mortgage down to the value of the property less what it would take to put the property in perfect condition. So if you needed a new roof, the value of the investment property appraisals would be reduced by the cost of the repair or replacement of the roof. Same for electric or plumbing. The only difficulty with stripping the investment property mortgages is that the Debtor must repay the entire value of the investment property during the five year repayment period.
