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Montana Supreme Court Decides ATVs Should Be Treated Like Cars in Bankruptcy Cases - In re Holzapfel

October 25, 2011

An important part of our work as Claremont consumer bankruptcy attorneys is helping clients determine which pieces of property they want to claim as exempt from the bankruptcy. Though bankruptcy is determined by federal law, each state has its own set of bankruptcy exemptions, which are slightly different rules, and filers can opt for the state or federal set of exemptions. In In re Holzapfel, the Montana Supreme Court clarified an interesting exemption in its outdoorsy state: an exemption for sporting goods. Debors Michael and Lynn Holzapfel had jointly filed for bankruptcy and claimed an ATV under the sporting goods exception. The U.S. Bankruptcy Court asked the Montana Supreme Court whether this was the proper exemption. The court ultimately found that an ATV is better classified as a motor vehicle.

The Holzapfels filed in December of 2010 and listed a Yamaha ATV as an exempt sporting good. The rule allows up to $4,500 worth of sporting goods and firearms to be exempted, with individual items worth no more than $600 each. The trustee for their case objected that the sporting goods exemption does not apply, but the Holzapfels argued that the Montana Constitution requires courts to construe laws liberally. The U.S. Bankruptcy Court for the district of Montana certified the question to the Montana Supreme Court.

The high court made short work of the question by ruling that both parties had been focusing on the wrong part of Montana's list of exemptions. Under Montana law, the court said, an ATV is better classified as a motor vehicle than a sporting good. The Montana code defines a "motor vehicle" as a vehicle propelled by its own power, including a "quadricycle," the legal name for ATVs. It noted that ATVs are subject to registration and title requirements like cars in Montana. Sporting goods and firearms are not subject to these requirements, it said, and thus it's clear that the sporting goods exemption was not designed to apply to motor vehicles. Thus, the high court found that the ATV should be classified as a motor vehicle rather than a sporting good. However, it said, the Holzapels may choose to claim an exemption for up to $2,500 in interest in the ATV.

As Fullerton personal bankruptcy lawyers, we don't believe they're likely to make that choice. Confronted with a choice between keeping a car of greater value -- especially in a spread-out state like Montana -- and an ATV, most bankrupt families would likely choose to keep the car. It's unfortunate for these debtors that the court did not apply the sporting goods exemption, since ATVs can have practical as well as recreational uses. However, we suspect the decision conforms to the intent of the Montana lawmakers who wrote the exemptions list. Bankruptcy, especially Chapter 7 bankruptcy, is a time when filers must make choices about which piece of property are important to them emotionally, or as a means to make a living. These choices aren't always easy, but as Torrance individual bankruptcy attorneys, we believe they offer filers the greater benefit of being able to start their financial lives over without any debt hanging over their heads.

If you feel like you're drowning in debt and you can't see a way out, Howard Law, P.C., may be able to help. For a consultation on your situation and your legal options, call us today at 1-800-872-5925 or send us a message through our website.

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