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Debtor on Loan, but not the owner?

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At 713Training.com we often get questions from our students about unique situations they run into while drafting bankruptcy petitions. Here is a recent question we received in an E-mail.

“How do you list a car on the bankruptcy petition where the debtor is only on the bank loan? The son has possession of the car, is the registered owner, and also makes the payments. Do we just list it on schedule D and skip listing it on schedule B?”

Thank you for your email. Let’s think through the logic of the situation to arrive at the answer to your question.

Schedule B is where the debtor’s personal property is listed, and since the debtor does not own the car in question, it should not be listed on Schedule B, (as you eluded to), which would also automatically list it on Schedule D (the software automatically does this to save time).

So should you put the loan on Schedule D yourself? Since Schedule D is for creditors holding secured claims, the question to ask yourself, is whether or not this is a secured or unsecured loan. If it were secured, the debtor would have something to lose by not paying the debt; if it were unsecured, the debtor would have absolutely nothing that could be taken away from them by not paying the debt.

In the scenario you described, the debtor has absolutely nothing to lose by not paying the debt, as he/she doesn’t own the car, but rather is only on the loan. This being the case, the loan for this car is unsecured and does NOT belong on Schedule B. Rather, this car loan, from the debtor’s perspective is an unsecured non-priority claim, and unless instructed otherwise by the attorney, belongs on Schedule F, where this type of claim is reported.

Had it been the owner of the car filing bankruptcy, the property would be listed on Schedule B, and the debt would be listed on Schedule D, as the loan would be secured by the car, which that debtor would lose if he/she stopped making the payments.

Sincerely,

-The 713 Training Team

We love to hear from our students and help them where we are able. Remember to consult with the attorney that you are doing petitions for, they may have a certain procedure for you to follow in unique situations such as this.

Sincerely,

-The 713 Training Teamwww.713Training.com
1-800-535-9984

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Disclaimer: We at 713Training.com are not attorneys; any information provided by 713 Training should not be considered legal advice. The information in this article, and any other materials provided by 713 Training, whether delivered verbally, written or via any other means, including electronic/digital delivery and storage, is for training purposes only, and is intended for individuals who work under the direction of a licensed attorney.