January 3, 2019
If you file for bankruptcy in Oklahoma, the Oklahoma motor vehicle exemption can help you keep your car, truck, van, or another vehicle. The exemption allows you to protect $7,500 of vehicle equity. If you’re married and both spouses have an ownership interest in the car, you can double the exemption amount to $15,000—possibly more if you own a business.
Read on to learn more about the Oklahoma motor vehicle and tools of the trade exemptions. See How to File Bankruptcy in Oklahoma for even more Oklahoma exemptions, as well as tips for filing a bankruptcy case.
Oklahoma’s motor vehicle exemption plays a large role in determining whether you can protect the equity in your car. If the exemption covers all of the vehicle equity, then the equity is fully protected. If the exemption doesn’t, here’s what will happen:
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. Typically, you’ll make your car payments in your Chapter 13 plan.
However, you could run into problems if you’re behind on payments and file for Chapter 7. You’ll find more information about this issue in Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?
In Oklahoma, a single filer can exempt up to $7,500 in equity in a car or other vehicle. This amount increases to $15,000 for a married couple filing together when they both own the vehicle.
Example 1. Liam owns a 2008 Dodge Durango worth $19,000. He owes the dealer $14,000 on the loan leaving $5,000 of equity in his truck. Liam can file a Chapter 7 bankruptcy and fully protect the equity using the Oklahoma motor vehicle exemption. However, he’ll have to remain current on his payment.
If Liam falls behind, his lender will be able to repossess the vehicle after the bankruptcy ends. If Liam is behind before filing for bankruptcy, the automatic stay will stop a pending repossession. However, the lender could file a motion asking the court to lift the automatic stay. If successful, the lender would be able to move forward with the repossession before the case ends.
Example 2. Assume that the facts are the same as above, except that Liam files for Chapter 13 bankruptcy. Because the exemption fully covers the vehicle equity, Liam won’t need to pay for it through the plan. By contrast, if Liam had $17,500 in equity, he would need to repay his unsecured creditors $10,000 through his repayment plan in addition to his monthly payment. Liam might have to pay even more if he has additional nonexempt property or disposable income.
Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. Married couples can double the Oklahoma motor vehicle exemption and protect up to $15,000 of equity.
You can use the Oklahoma motor vehicle exemption to protect one motor vehicle, such as a car, truck, van, or motorcycle.
Some states allow bankruptcy filers to use the federal bankruptcy exemptions instead of state exemptions, but Oklahoma is not one of these states.
Oklahoma’s tools of the trade exemption will allow you to protect up to $10,000 of equity in property used in your trade or profession. For instance, if you use a vehicle in your profession, such as a construction work truck, you might be able to protect additional equity. Keep in mind that a vehicle used to commute to and from work is unlikely to qualify as a vehicle needed in a trade or profession.
You can find Oklahoma’s motor vehicle statute—31 Okla. Stat. Ann. Sec. 1(A)(13)—on the website of the Oklahoma Legislature.