Mercedes 320E: ‘Sweet Ride’ or ‘Tool of the Trade?’

Today the 9th Circuit Court of Appeals wants to know whether a Mercedes 320E sedan is a “sweet ride” or just a “tool of the trade” for a bankrupt real estate agent. The court sends the fate of Angie Garcia’s Mercedes back to bankruptcy court in Los Angeles to determine whether it could be exempt from a lien on the car under California’s “grubstake” exception as a tool of the debtor’s trade. That exemption more commonly applies to such things as a carpenter’s pick-up truck.

Garcia took out a loan of $22,000 in 2006, using her five-year-old Mercedes as collateral. She later filed for bankruptcy with nearly $13,000 still owed on the loan, but with a car worth $5,400.  She argued it should be exempt from the lien. California allows a debtor to exempt up to $18,000 for “any property,” from becoming part of the bankruptcy estate subject to sale. The exemption is known as the “wildcard” or “grubstake” exemption.

The bankruptcy judge told Garcia no, the wildcard exemption could not be used for vehicles because other parts of the code deal explicitly with them.

Garcia took her claim to U.S. District Judge Josephine Tucker in Los Angeles who said the $18,000 exemption applies to “any property,” and that would include the Mercedes. Tucker then ordered the case back to the bankruptcy court to determine if it really qualifies as a tool of her trade as a realtor.

The credit union that loaned her the money appealed and the 9th Circuit agreed with Tucker Tuesday and sent the case back to the bankruptcy court with a question from Judge Barry Silverman.

What is the Mercedes 320E: “sweet ride” or “tool of the trade”?

Case: In re: Angie M. Garcia, No. 11-56076

 

 

 

 

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