Summer has come to an end, although it never is truly too cold for a boat ride on one of Arizona's beautiful lakes. However, owning a boat can quickly become an expensive hassle. It's often said that the happiest day of a boat owner's life is when they sell it. But in this economy, there are fewer buyers on the market with disposable income for a watercraft. If your overall situation feels like a sinking ship, bankruptcy might be able to help. Chapter 7 and chapter 13 bankruptcy provide different avenues to debt relief in Phoenix, Arizona. You can minimize the drawbacks and maximize the benefits of filing by retaining a quality bankruptcy attorney for your case. At Phoenix Bankruptcy Lawyers, your initial consultation is free, and most of our clients are eligible to file for Zero Dollars Down. Your debt relief journey begins today when you call 602-509-0955 for your free phone consultation with an experienced member of our team.

Boat Ownership in Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most popular form of consumer bankruptcy because it clears limitless amounts of unsecured debts in a matter of just a few months. Getting rid of burdensome unpaid medical bills, credit card debt, and more could be life-changing for many households, especially if they live paycheck-to-paycheck. But what a boat owner plans to do with their boat will impact how effective a chapter 7 filing will be for their situation.

A boat owner who wants to get rid of their boat with a remaining loan could benefit greatly from chapter 7 bankruptcy. In bankruptcy, debtors can surrender a secured asset so they are no longer liable for the debt attached to that asset. Depending on the equity in the boat, its current market value, available buyers, and other factors, it may be faster to simply surrender a boat in bankruptcy than sell it. With all the costs that come with boat ownership, this may still end up saving that person money as opposed to selling. It will also clear the rest of their unsecured debts to get their finances in order.

Keeping a boat becomes more complicated in chapter 7 bankruptcy, whether or not there is a remaining loan balance. Chapter 7 bankruptcy debtors are only allowed to keep assets with exemptions applied to protect them. Assuming the boat in question has a motor, the only exemption available under Arizona law is the motor vehicle exemption. Arizona does not have a specific boat exemption or a wildcard exemption for the debtor to use on any asset of their choosing. And if the debtor has a car and a boat, using the motor vehicle exemption on the boat will put their car at risk, which they probably use more frequently than their boat.

Boat Ownership in Chapter 13 Bankruptcy

There are income restrictions in chapter 7 bankruptcy that only leave chapter 13 as an option for some debtors. There are also unique benefits that lead some debtors to opt for chapter 13 bankruptcy over chapter 7.

Bankruptcy exemptions work differently in chapter 13 than chapter 7. They can affect how much a debtor has to pay each month for their payment plan, but that doesn't mean that the debtor can't keep those assets. So if a debtor doesn't want to choose between keeping their car and keeping their boat, chapter 13 could be a preferable option over chapter 7. It also could be their only option if their income is too high for chapter 7.

Chapter 13 bankruptcy could also be helpful to a boat owner who has fallen behind on payments but doesn't want to lose their boat to repossession. If a boat owner under these circumstances filed for chapter 7 bankruptcy in an attempt to save their boat, they would only potentially have 3 to 5 months, or the lifespan of a chapter 7 case, to catch up to current. In chapter 13 bankruptcy, the amount in arrears is spread out over the course of 3 or 5 years. But creditor protection ends if the debtor misses their bankruptcy plan payments and the case is dismissed. That would give the lender an opportunity to repossess the boat, whether or not the case is eventually reinstated.

Can I Protect Proceeds from a Boat Sale?

A boat owner struggling with debt might be deciding between bankruptcy and selling their boat to pay back their creditors, but what if they didn't have to choose? In other words, what if a boat owner could sell the boat and keep the proceeds while also clearing their debt through bankruptcy? While this would be ideal for many, it isn't a reality for Arizona boat owner bankruptcy debtors. The motor vehicle exemption can only be used on a boat or a car, and most debtors need their car more than their boat. And while proceeds from a home sale can be protected with the homestead exemption, the same concept doesn't apply to motor vehicles in bankruptcy. Those funds would need to be protected with the cash and bank accounts exemption because Arizona does not have a wildcard exemption to protect proceeds from a boat sale. Unfortunately, Arizona's cash and bank accounts exemption only protects a limited amount, enough to cover some basic essentials. So if a boat owner wishes to sell their boat before filing for bankruptcy, they will also need to spend those funds on reasonable expenditures to avoid leaving unprotected funds at risk of seizure by the bankruptcy trustee.

Here, it is important that the debtor is careful with how they spend their boat sale proceeds, or that purchase could end up seized and sold by the bankruptcy trustee as well. Retirement savings can seem like a safe investment, but the trustee may take issue with large retirement contributions made in the months shortly before bankruptcy. However, the debtor can continue making retirement contributions at their regular rate. Some other ideas for reasonable pre-bankruptcy expenditures include:

• Stocking up on non-perishable foods and household items
• Routine vehicle maintenance, tires, and necessary repairs
• Dental work and other medical care
• Clothes and school supplies for your kids
• Bankruptcy attorney's fees
• Stocking up on contact lenses or a new pair of glasses
• Repairing or replacing broken appliances and furniture

Struggling to Stay Afloat? Learn More About Bankruptcy as a Boat Owner in Arizona Today

If you're drowning in debt, bankruptcy could provide a lifeline both by clearing liabilities and giving you a chance to surrender a boat that costs you more than it benefits you. But mistakes in your bankruptcy petition could make your case more of a hassle than owning a boat ever was. Chapter 7 and chapter 13 bankruptcy can be complicated and stressful for someone inexperienced in such matters, simply starting with the decision between the two. You don't have to incur any cost or risk by taking the first step towards debt relief with a bankruptcy consultation by phone. Our Phoenix Bankruptcy Lawyers offer free consultations to get started and payment plan options starting as low as Zero Dollars Down. To speak with a member of our team about your potential case, call 602-509-0955.