The Vermont motor vehicle exemption helps determine whether you can keep your car, truck, van, or other vehicle if you file for Chapter 7 bankruptcy. In Vermont you can protect up to $2,500 of equity in your car, more if you're married. And you may be able to use another exemption to protect even more equity. Read on to learn more about the Vermont motor vehicle exemption.
(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
Vermont’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 Vermont’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?
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 Vermont's Motor Vehicle Exemption
In Vermont, you can exempt up to $2,500 in equity in your car or other vehicle.
Example. Frank owns a 2006 Toyota Corolla. He owes the dealership $3,000 for the car, and the car is worth $5,000. In Vermont, Frank would be able to protect his car in bankruptcy because the $2,500 motor vehicle exemption is enough to cover the $2,000 of equity in Frank’s car.
The Federal Motor Vehicle Exemption
Vermont allows you to choose between the state exemptions or the federal bankruptcy exemptions. The federal motor vehicle exemption amount changes every three years. To find the current amount, see our article The Federal Bankruptcy Exemptions.
Using Vermont's Wildcard Exemption to Protect Your Car
If the equity in your car is more than $2,500, you may be able to cover the extra equity by using a wildcard exemption. The Vermont wildcard allows you to protect additional equity in two ways: First, you can protect an additional $400 of equity in your motor vehicle using the wildcard exemption. Second, if you did not fully use the exemptions for jewelry, household goods, crops, or tools of the trade, you can use the leftover value, up to a maximum of $7,000, to protect your motor vehicle.
Example. Say Frank’s Corolla is actually worth $7,000 and he owns it free and clear of any debt. He uses the motor vehicle exemption to protect $2,500 of equity, leaving $4,500 of equity. Vermont allows you to protect up to $5,000 of value in growing crops, but Frank doesn’t own any crops. He can use the growing crops exemption as his wildcard, and protect the additional equity in his car.
Can Married Couples Double Vermont's Motor Vehicle Exemption?
Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. Vermont allows you and your spouse to double the motor vehicle exemption, to protect up to $5,000 of equity in your motor vehicles.
(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 Vermont motor vehicle exemption covers one or more cars, trucks, vans, or other motor vehicles.
Other Information About Vermont's Vehicle Exemption
In Vermont, you can protect up to $5,000 of equity in “tools of the trade,” meaning property you use to carry on your trade or business. If you use your vehicle to carry on your profession, for example, a delivery 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 Vermont's Exemption Laws
You can find Vermont’s motor vehicle exemption at 12 V.S.A. 2740.
You can find the Vermont statutes on the website of the Vermont State Legislature at www.leg.state.vt.us/statutesmain.cfm. To learn how to find state statutes, see Nolo’s Laws and Legal Research area.