The Montana Motor Vehicle Exemption in Bankruptcy
Learn about the Montana motor vehicle exemption and how your car is treated if you file for bankruptcy.
The Montana motor vehicle exemption helps determine whether you can keep your car, truck, van, or other vehicle if you file for Chapter 7 bankruptcy. You can protect up to $2,500 of vehicle equity in Montana, and double that amount if you are married and filing jointly. And if you use your car or truck in your business, you may be able to exempt even more. Read on to learn the details of the Montana motor vehicle exemption law.
(For more information about exemptions, including how they work and which ones you can use, see our Bankruptcy Exemptions area. For information specific to the motor vehicle exemption, see our Motor Vehicle Exemption in Bankruptcy area.)
The Motor Vehicle Exemption and Your Car
Montana’s motor vehicle exemption plays a large role in determining whether or not the bankruptcy trustee can take your vehicle to repay your unsecured creditors. If the equity in your car is less than Montana's car exemption, then the trustee cannot sell it. If the equity in your car is significantly more than the applicable exemption amount, the trustee is likely to sell your car to repay your unsecured creditors. For details, see The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy?
Keep in mind that even if your car is safe from the bankruptcy trustee, the lender may be able to repossess your car during or after bankruptcy. To learn more, see Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?
The Amount of Montana’s Motor Vehicle Exemption
In Montana, you can exempt up to $2,500 in equity in your car or other vehicle.
Example. Rick owns a 2007 Ford F-150. Rick’s truck is worth $14,000 and he owes the dealership $13,000, which means he has $1,000 of equity in his truck. Rick can file a Chapter 7 bankruptcy in Montana and protect the equity in his truck with the motor vehicle exemption.
The Federal Motor Vehicle Exemption
Some states allow bankruptcy filers to use the Federal Bankruptcy Exemptions instead of state exemptions, but Montana is not one of these states.
Can Married Couples Double Montana’s Motor Vehicle Exemption?
Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. Married couples can double the motor vehicle exemption in Montana to protect up to $5,000 worth of equity in a vehicle.
(To learn more about filing a joint bankruptcy with your spouse, see Bankruptcy Considerations for Married Couples).
What Vehicles and Insurance Are Covered by the Motor Vehicle Exemption?
The Montana motor vehicle exemption allows you to protect one motor vehicle, such as a car, truck, or van. In 2011, the Montana Supreme Court held that ATVs (all-terrain vehicles) are considered motor vehicles and you can protect them with the motor vehicle exemption, but you cannot protect them with the sporting goods exemption.
If your motor vehicle is lost, stolen, or damaged, you can protect the insurance proceeds for up to six months after you receive them, as long as they are traceable to a vehicle that would have been exempt had it not been lost or damaged.
Exempting a Work Vehicle Under Montana's Tools of the Trade Exemption
In Montana, you can protect up to $3,000 of equity in "tools of the trade," meaning property you or your dependents use to carry on a trade or business. If you use your vehicle to carry on your profession, for example, a tow truck, you can protect additional value under this exemption. Note that using your vehicle to commute to and from work will generally not qualify the vehicle as a tool of the trade.
Checking Montana’s Exemption Laws
You can find Montana’s motor vehicle exemption at Mont. Code Ann. 25-13-609(2).
When the Montana Exemption Amounts Are Updated
The exemption laws in Montana change periodically. The laws are reviewed every other year and updated information is posted on the Montana Legislature website after the legislative session is over.