Protecting Your Child's Car In Chapter 7 Bankruptcy

It’s getting to the point where you need a lawyer to buy a car for your child. This is certainly true for people who buy a car in their own name for their minor child to use. People consider the car be their “child’s car” not understanding that Florida law considers the car to be the parents’ asset even though the parents do not drive the car. To make matters worse, parents typically get their minor children inexpensive cars which are already paid for. They will give the child the old, paid off clunker and then finance the purchase of new car for themselves.

When the parent files Chapter 7 bankruptcy they find that the bankruptcy trustee will ask them to turnover, or buy back, the “child’s car.” These bankruptcy debtors do not anticipate that the “child’s car” legally is their own car if it is titled in the parents’ names as it usually is because a minor child cannot own property in Florida.

What is the solution? A recent bankruptcy case from the Southern Division of Florida explained how parents properly can buy a car for their child’s use and protect the car from their creditors and the Chapter 7 bankruptcy trustee. The court said that bankruptcy debtors could own a car as a trustee for their minor child under Florida’s Uniform Transfers To Minors Act. The car can be titled as “parent name’ as custodian for “child name” under the FUTMA” or similar designation. The details of the Minors Act are in Florida Statute 710.11.

Not many bankruptcy debtors are going to understand this law when they are giving their child a car to drive. As I said, you almost need a lawyer to buy a car these days. See 10-19596