Can you get a new (used) car in Ch.13?

[Forza42]

I have an email to my lawyer, but just wanted to know if you guys knew. I forgot the rules. We have a car that was valued at $15K when we started, my husband's car was worth $5K. My car is giving us trouble and my parents want to help. Can we sell the car, give money to them, then have them buy new car in their name? Or can we just get another car worth $15K? Thanks!

[justbroke]

Every Trustee should have a process for obtaining a new car loan. This typically requires a Motion to Incur Debt as well. I know that our local Chapter 13 Trustees have a form that is completed by the debtor. The Trustee reviews the form and determines whether they'll approve the purchase.

I don't know the best way to approach this. You can't just a.) sell the vehicle without permission to sell, and b.) give the proceeds of the sale to your parents. Interestingly, the question will probably come down to the value of the vehicle and what is left to be paid in the plan. The replacement vehicle, if paid inside the plan, would need to have a similar payment. You'll need to realize that any new loan will be difficult to obtain and likely have a high percentage rate (in the high teens).

I can see your strategy which has your parents buying the vehicle in their name. Nothing would stop them from purchasing a vehicle and letting you enjoy the use of that vehicle. Your issue is around the sale of and the proceeds of the sale of the old car.

In some interesting cases, attorneys have done a Motion to Substitute Collateral. In this method, you are allowed to sell the existing car and apply the proceeds to the new car, while allowing the creditor to enjoy their lien on the new vehicle. It's a bit more tricky and I have not personally dealt with a collateral substitution.

[LadyInTheRed]

Forza42, you didn't say you wanted to finance a car. Do you want to buy one with cash? If so, I am pretty sure you can do that without any trustee or court approval. Check with your attorney first.

[Forza42]

Thank you both. You are correct, no financing. We will sell car, and either my parents will take money and buy us a new one and put it in their name, or they'll just add money to it and it will be in our name. I'm assuming we can't own a car that is worth more than $15K, but I'll ask lawyer. So this will be a cash transaction.

[switch625]

Who will insure the vehicle? Before you have your parents purchase a vehicle and title/register it in in their name, check with your auto insurance company to see if they are willing to insure the replacement car in your name, even if your parents own the car and have it registered in their name.

[Forza42]

Who will insure the vehicle? Before you have your parents purchase a vehicle and title/register it in in their name, check with your auto insurance company to see if they are willing to insure the replacement car in your name, even if your parents own the car and have it registered in their name.

Thank you for bringing up insurance, didn't think about that.