Summary:
Husband and Wife filed Chapter 7, with the Wife claiming both an equitable interest in a 2006 Lexus, despite not being listed as an owner on the title, and claiming an exemption. The Trustee objected, relying on In re Horstman, 276 B.R. 80 (Bankr. E.D.N.C. 2002), where the bankruptcy court held that a debtor could not claim an exemption in a vehicle, titled in her husband’s name only, based on the definition of “marital property.” This proposition was expanded in In re Thams, No. 10–33089, 2011 WL 863293, at *4 (Bankr. W.D.N.C. Mar. 10, 2011), where the bankruptcy court held that allowing an equitable claim “failed to consider the application of the Trustee's strong arm
powers under 11 U.S.C. § 544(a) and their effect on the Female Debtor's assertion of an equitable
title in the Vehicles given that the joint estates of co–debtors are separate legal entities.”
Here the bankruptcy court found that the vehicle was purchased with joint funds and was used almost exclusively by the Female Debtor. Relying on several North Carolina appellate decisions, See for example Younts v. State Farm Mut. Auto. Ins. Co., 13 N.C. App. 426, 428, 185 S.E.2d 730, 732 ( the bankruptcy court held that “the presumption of ownership by the party named on the certificate of title may be rebutted by a showing of joint ownership when a majority of the purchase price of the property was paid by a family member of the other party.” In re Johnson, 210 B.R. 153, 156 (Bankr. D. Minn. 1997). Accordingly, the exemption was allowed.
Commentary:
This opinion also contrasts with In re Evans, No. 09–50450, 2009 WL 3259427 (Bankr. M.D.N.C. Oct. 8, 2009), where the Debtor was only allowed to claim a 50% interest in property titled jointly. The Jourdan Court distinguishes that case by noting that in Evans the Debtor had not claimed an equitable interest.
Additionally, this opinion might open up the vehicle ownership deduction for debtors, whose names may not be on the title to the vehicle, but are the equitable owner. Even if the loan was in the title holder’s name, the equitable owner could have an “applicable monthly expenses” under Ransom.
This case, however, is not without substantial dangers for Debtors- If a Debtor can exempt an equitable interest in a vehicle, then it would seem likely that a Trustee could also drag such vehicles into the bankruptcy estate. It should not be surprising if Trustee start asking Debtors if they are driving someone else’s car, with an eye towards seizure and sale of such vehicles. (This is already contemplated in Question #14 on the Statement of Affairs.)
For a copy of the opinion, please see:
Jourdan- Exemption of Vehicle by Non-Titled Equitable Owner.pdf
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