RV Bankruptcy: Are RVs Protected in Bankruptcy

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Whether an RV is protected in bankruptcy depends on state law and on whether an exemption applies. Some property is exempt despite its value. Other property, however, is only exempt up to a certain amount. An exemption allows a debtor in bankruptcy to retain a certain amount of equity in real and personal property. Depending on the state, a debtor that uses an RV as a primary residence may qualify for a homestead exemption. If a debtor uses an RV for recreational purposes, the debtor may be able to keep it by using another exemption. See also: Can you keep an RV when filing Chapter 7?

When an RV is a Primary Residence

Every state provides an exemption for a home. This is called a homestead exemption. This means that a debtor can keep a certain amount of equity in a qualified home. If the equity exceeds the allowed amount, in Chapter 7 bankruptcy the trustee can sell the home, pay the debtor for the home, or pay off the mortgage on the home. In Chapter 13, the debtor must pay unsecured, non-priority creditors an amount that is at least equal to nonexempt property.

Depending on the state, an RV may qualify for a homestead exemption if it is used as a residence. Every state defines a dwelling house differently. Definitions include real or personal property used as a residence, a manufactured home used as a residence, or any property used as a residence. A RV will not necessarily qualify as a residence entitled to a homestead exemption. For example, if a debtor uses an RV to travel and it is not fixed in a permanent physical location, it may not qualify for a homestead exemption.

Using an RV as a Vehicle

An RV that is not used as a residence will not qualify for a homestead exemption. However, it may qualify for another exemption. For example, a motor vehicle exemption -- which usually ranges from $2,500 to $3,000 -- may protect an RV or the debtor may be able to use a “wildcard” exemption. In Chapter 7, if an exemption does not protect the full value of the RV, the debtor can buy it back from the trustee.

Getting Legal Help

Determining what exemptions apply to an RV can be difficult to ascertain, especially if it is used as a primary residence. A bankruptcy attorney can help determine whether state law will allow a debtor to use a homestead exemption or whether another exemption applies.

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