In re: Bosworth, No. 10-41615-JDP (Bankr. D. Idaho, March 14, 2011)
Can a debtor claim an All-Terrain Vehicle ("ATV") as exempt under the bankruptcy code? It depends, apparently! In a recent 9th Circuit decision, a bankruptcy court in Idaho held that it all turns on whether the state permits ATVs to be driven on most roads in the state.
Once a bankruptcy petition is filed, all property of the debtor becomes property of the bankruptcy estate automatically under section 541(a). This property can then be distributed to creditors if it is not claimed exempt under federal or state exemption lists. In Idaho, only Idaho exemptions are allowed to be taken.
The debtors in this case claimed that their Honda ATV was exempt under Idaho law, but the trustee objected. The Idaho provision states that "An individual is entitled...to an exemption of one motor vehicle to the extent of a value not exceeding seven thousand dollars." Idaho Code § 11-605(3).
Although the Idaho bankruptcy courts had previously held that ATVs do not qualify as motor vehicles, a recent amendment to the Idaho Code provided for the issuance of restricted license plates for ATVs. The debtors argued that because ATVs can now have license plates, they are now "motor vehicles" under the statute and can be claimed exempt in bankruptcy.
However, the court held that the Amendments did not really change where ATVs could operate, prohibiting them from going on highways and only permitting them on country roads, where they were largely permitted before the Amendments. Therefore, the court's ruling that ATVs are not motor vehicles exempt in bankruptcy remained unchanged.
