Bankruptcy Questions: Can an RV Be Protected During Bankruptcy? - Westgate Law

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Bankruptcy Questions: Can an RV Be Protected During Bankruptcy?

The purpose of filing for bankruptcy is to obtain the protection it affords. The discharge of debt is meant as a relief for overwhelmed consumers when there are no other plausible solutions. It is not designed as a punishment or a consequence. It is designed as a solution. But in some situations, it can seem as if filing for bankruptcy comes with a set of harsh consequences. One such situation is when the debtor filing for bankruptcy utilizes a recreational vehicle (RV) as their primary home.

When filing bankruptcy there are certain protections that can be utilized to keep petitioners from losing their home, etc. Some will assume that if they currently use their RV as their primary home, they can access the protection that is available to those who are declaring bankruptcy, but do not wish to lose their home. This is not true. In fact, the lender who holds the note on the RV can repossess the vehicle and leave the petitioners on the street. It seems like a punishment, but in fact it’s simply a harsh reality. The bankruptcy laws are designed for the public in general. In certain circumstances, the law that is appropriate and useful for “most” becomes seemingly harsh and thoughtless for the “few.” But that is the nature of the law.

The fact of the matter is this: the lender who owns the note on the recreational vehicle doesn’t care where you sleep. They just don’t want you sleeping on their property. It’s definitely harsh. It’s definitely heartless. But you have to remind yourself that financial institutions don’t have hearts – they have rules governed by law. That’s just the way it is.

If you use a recreational vehicle as your primary home and are currently delinquent on payments, then filing for bankruptcy probably isn’t going to be useful in your situation. Chapter 7 bankruptcies can solve a lot of financial problems, but this isn’t one of them. You cannot file a Chapter 7 bankruptcy for discharge of debt and protect your RV from repossession at the same time. The lender will simply follow a motion with the bankruptcy court that shows you are delinquent and they will have the right to possess the RV.

Potential petitioners in this situation do have a second option: Chapter 13 bankruptcy. The Chapter 13 or reorganization bankruptcy allows debtors to pay back the delinquent loan over a predetermined timeline (typically 3 to 5 years). During this time the owner of the RV would need to make all regular RV payments along with the agreed upon payment to the court-appointed bankruptcy Trustee. The payment made to the trustee is forwarded on to the creditor, which will eventually bring the RV loan current. When the Chapter 13 bankruptcy is completed, you will emerge current on the RV loan and will no longer need to live with the worry that your primary home will be repossessed.

Additionally, if you currently owe drastically more than the RV is worth, you may be able to state this during your Chapter 13 bankruptcy and have the loan balance lowered to fair market value. As long as the agreed upon amount is paid within the agreed upon timeline, you will still be able to walk away current and without fear of repossession.

To discuss options available through Chapter 13 bankruptcy further, please get in touch with the southern California bankruptcy attorneys at Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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