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A lot of people have asked the boats and bankruptcy question over the years. You can usually keep your boat during your bankruptcy case. Boats, however, are usually considered non-essential items in bankruptcy. Because they are considered non-essential in bankruptcy, certain factors may play into whether you will ultimately be able to keep your boat through the bankruptcy case.
If the boat you own is considered “reasonable,” then you can usually keep your boat during bankruptcy. The first test to whether it is reasonable is the value of the boat. If you have a paid-in-full boat, the value of the boat must fit into your bankruptcy exemptions. In most states such as Indiana, there is a “wild card” exemption. For instance, in Indiana you can keep general property up to $10,250 with this exemption. If your boat value fits into that exemption with the other property you own, then you can usually keep it. This will be something your attorney will consider in your case.
You can also keep boats that have been financed through a loan. Once again, the analysis is whether the boat loan is reasonable. It is generally easier in Chapter 7 to keep boats after you file your case. On Chapter 7, the Trustee will usually not object to you keeping your boat. All you usually need to do is continue to make the payments and consider whether or not you want to sign a new loan agreement called a reaffirmation.
You can also keep financed boats during a Chapter 13 case. The “reasonable” test, however, is more strictly applied in Chapter 13. If you have a small boat loan, the trustee will usually allow you to pay it through the Chapter 13 plan without much difficulty. Larger boat loans can pose a problem in Chapter 13. Sometimes the trustee will only allow you to keep a larger boat loan during Chapter 13 if you pay a much higher percentage back to the rest of your creditors. This would, in turn, have the potential to greatly increase your Chapter 13 payment.
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