Bankruptcy Questions Answered

Debtor Titled Business’s Work Truck In Debtor’s Name For Financing: Will Debtor Lose Truck In Bankruptcy?

Debtors get only a one thousand dollar exemption for cars. This exemption does not go very far when the vehicle in question is a work truck. This past week one of my clients presented to following fact situation. The debtor needed a truck for his business. He found that he could get better financing if he purchased the truck in his personal name rather than the business name. The truck was used exclusively for business. He purchased the truck for all cash with a check from the business’s checking account. He insured the truck with a commercial insurance policy paid by the business, and he depreciated the truck on the business’s income tax return. He wants to know if a Chapter 7 trustee will take his truck.

Anytime a bankruptcy debtor has a vehicle titled in his personal name its going to be an issue. I think the debtor has to list the truck under his personal property list on his bankruptcy schedules. If the debtor does not list the truck on his Schedule B because he believes it is the business’s vehicles, and the trustee finds out about the truck by checking public records, it will look like the debtor was trying to hide an asset. One option is to list the debtor and the business as owners to put the trustee on notice that the business has an interest in the truck.

Once all the facts are made known, I think this truck is not the debtor’s property. In my opinion, the debtor holds legal title for the benefit of the business. The debtor told me that he paid no personal money to the purchase or maintenance of this truck. Although vehicles titled in the debtor’s name are presumed to be the debtor’s property, this presumption can be overcome by facts which show that the debtor is holding legal title for the benefit of another party, or entity, and that the debtor and other party treat the vehicle as property of the other party.