Cars- Lease coming up and Older Car

[jhy12]

Hey all- we meet with our attorney next week but trying to get an idea on what to expect. My car is a 2014 Equinox and we are coming up on our lease in December. We were hoping to buy it out and have a quote from our credit union (who we just moved to) with a reasonable payment of 320 at 3.99% for 60 months. My husbands car is a 2007 Chevy Malibu with 147,000 miles. Good, reliable car but worried if it won't last the full 5 years (esp in MN, winters are rough on cars and he drives a good 45 minutes one way everyday).

Would the trustee allow us to get a new car for my hubby AND buy out my lease? In the next month or so? Or will they object to either or both? Obviously, we both need cars to get to our jobs but wasn't sure how this will all play out. Thanks!

[justbroke]

I wonder what your attorney says about this. Typically, people buy new cars, on the "quiet" advice of their attorney, before filing. I assume you're asking about purchasing a new car and buying out your lease PRIOR to filing. Purchasing a new vehicle shortly after filing is problematic for so many reasons (lower credit score, new bankruptcy, Trustee approval required) that it's not even worth talking about.

I personally know people who have purchased a car a week before filing with no questions from the Trustee. It's a secured debt and unless you went and purchased a luxury vehicle or one with a payment over the national allowance (about $517/month), then why would the Trustee even care? The Trustee probably wouldn't even bat an eyelash. I can't comment personally on the lease, but you need to have a car, so I would think the Trustee would not care about that either.

Remember, a Chapter 13 is much different from a Chapter 7. Chapter 13 Trustees, while they can be a little tough when it comes to the plan, are much more understanding about secured debt.

[jhy12]

That's what I was wondering- if we could buy out the lease early AND purchase a new car. Seems so backwards to me. Taking on this debt before filing for bk. Yet, feeding our dog might be deemed "unnecessary".
Another scenario- we can buy out the lease but wait to get a car until my husbands car really craps out. Our credit union says they can work with us even with the bad credit scores. How are trustees with buying a car a few years into the plan?

[justbroke]

Trustees are fine with vehicle replacements so long as it doesn't disrupt the plan too much. Reading that your husbands car is older, your attorney is likely to "strongly" suggest that you replace that car before filing. It can take a couple of months to get the approval to purchase a car while in an active Chapter 13. If you need the car for work, that could be problematic. You should also consider that you're likely to be in a 5 year plan and that's a long time to be with an old, unreliable car.

Credit Unions are nice but you may end up with a very high APR due to the bankruptcy. If your credit scores are good before filing, it may be "better" to obtain a new vehicle without the added paperwork, permission, and increased interest costs. Something to think about.