Property Titled in Your Name But Someone Else Makes Payments

I’m seeing this scenario more and more:  A middle aged couple who has had perfect credit their whole life walks in my office and wants to file bankruptcy because the Southwest Florida real estate market crashed, and the couple’s assets are depleted.  Because the couple had perfect credit in the past, the husband or wife had purchased a car for the couple’s college aged child a few years ago.  The child makes the payments on the car.  The question is:  Will the bankruptcy court consider the car an asset of the parents or the child?  Will the bankruptcy trustee take the car from the child to repay the parents’ creditors?

A number of factors determine the outcome in this case.

Any property titled in the debtor’s name is presumed to be property of the debtor.  The debtor can overcome the presumption if he shows that he is holding property for someone else in a constructive trust.

In the scenario listed above, if mom bought the car for daughter because daughter was 18 and could not get financing, the car is presumed to be the mother’s car.  If the daughter had made all the payments on the car and has made all the payments for the insurance, the trustee
will more than likely take the position that the car will not be counted as bankruptcy property.  If you are a debtor taking this position, be prepared to trace all the funds that were used to pay for the car and the insurance.

Keep in mind that the trustee might not take the same position if the child made the car payments and the parents made the insurance payments.

If you are contemplating bankruptcy, call an experienced bankruptcy lawyer in Fort Myers at (239) 206-1948.

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