Car Purchased For Another Family Member Still Included In Bankruptcy...

People often buy cars for their children or for an elderly parent. When they do so, some of these people  put their own names on the car title to get lower insurance rates or to reflect their own contribution to the purchase. Sharing car titles with a another family member  can be a problem if the you or the other family member subsequently files bankruptcy. In Florida, the general rule is that if your name is on the car (or boat) title, then you own the car. Therefore, a bankruptcy trustee can claim your interest in any car which has your name on the car title. 

There is a recent Florida Chapter 7 bankruptcy case that considered the debtor’s interest in a car she had purchased for her elderly mothers use. In this case, decided March 6, 2012, The debtor titled the car in the name of her mother and herself for insurance purposes. The court held initially that if the debtor’s name is on a car title the debtor has the burden to prove by clear and compelling evidence that she does not hold a beneficial as well as legal interest in the car which interest would be part of the debtor’s bankruptcy estate. 

In this particular case, the debtor purchased a car for her mother’s exclusive use. The debtor supports her mother. The debtor pays for the car insurance, and her mother pay’s maintenance and operation costs. However, the debtor’s payments to her mother for financial support are indirectly used to support the mother’s vehicle use. 

The court found that in paying for the car’s insurance and by paying indirectly for the car’s maintenance and use through support payments that the debtor has both a legal and beneficial interest in the car which may be part of the debtor’s non-exempt bankruptcy estate. The court said the result may have been different if the mother paid the insurance and maintenance with the mother’s own money. 

In re Fletcher, 11-35386-BKC-RBR