Question An expensive car repair during bk13

[Zombie13]

So, if we were to buy a car during the bk, we would need to talk with the attorney/trustee. But what about expensive repairs? Do we need to notify the attorney/trustee? Will this be a problem when we are ready to be discharged? Seems like we wouldn't have to, since the funds would come from the income already known.

[shipo]

While I cannot speak to the expensive repairs question, I can speak to something similar. During the 4th year of my Chapter 13 my (then) 16 year old Honda Accord succumbed to multiple types of corrosion all pretty much at the same time, imaging coming out to your car and seeing transmission fluid, coolant, brake fluid, and gasoline all leaking from your car at the same time; you get the idea. To make my car road legal again would have cost over $3,000, and even then it still would have been far from tip top as corrosion had gotten into the body of the car (sub-standard body work done be a previous owner), fixing that stuff would have cost that much again, probably more.

With the above in mind, deciding whether to "fish or cut bait" became imperative; I opted for a new(er) car and paid for it out of my meager savings. Whether the Trustee knew, or even cared, about my vehicle change mid-stream, I never found out. When the time for my discharge rolled around last year, I made my final payment (a few days after my penultimate payment had been posted), and got my discharge almost exactly four weeks later. No questions were asked about my current financial situation, or any expenditures I'd made along the way.

[Zombie13]

Thank you shipo. We have to flip a coin, so to speak. With 'the devil we know', as Barbisi has mentioned, we are very familiar with this current car, so we know it's personality and bad habits, so to speak. We don't have enough savings to purchase a vehicle we would feel comfortable with.

[Carmella]

If we get a car loan it’s a big process. We need to make a budget, state how we will afford it and find someone who will give us credit “for sure.” Then it goes to trustee/court. If we were to buy a junker cash I don’t know if the trustee would have to be informed. We still have to pay our payments on the dead car and after they are paid we then pay that amount into our BK payment. So it’s not like we can even pay off the loan and then use that amount towards a new car payment. This is why I have procrastinated and we are “car sharing.” I have thought about waiting until late summer and investigating options since we will be closer to the end.

[shipo]

If you buy a car for cash, the Trustee will never know about the purchase. I did that very thing during my fourth year and there is literally nothing about a cash car buying process which would inform the Trustee you bought a car.

[flashoflight]

We don't have enough savings to purchase a vehicle we would feel comfortable with.

The used car market is twice as large as the new car market. Lots of people have done just fine with used cars. So I might give you advice to learn to get comfortable with $5k used cars. Stay with boring reliable sedans like the Corolla and pay to have a mechanic inspect the car prior to purchase. $5k is enough to buy something that will get you to the finish line. It's not a forever car. Also the max most trustees will approve will make it impossible to get a new car without a large down payment, which itself could be seized by the trustee upon finding out about your slush fund.

In the long run if you get out of the cycle of new car loans and always buy used with cash only, you will save a boatload on depreciation and gain $500 month going to your 401k instead of your auto lender's pocket.

[shipo]

In the long run if you get out of the cycle of new car loans and always buy used with cash only, you will save a boatload on depreciation and gain $500 month going to your 401k instead of your auto lender's pocket.

Clearly you and I have a rather strong difference of opinion on this subject. I would strongly advocate never paying cash for a car; my advice is to leave the money in your investments in the first place and take out a low interest loan; in the end you'll have more money borrowing for a car than if you paid cash for it.

[flashoflight]

Clearly you and I have a rather strong difference of opinion on this subject. I would strongly advocate never paying cash for a car; my advice is to leave the money in your investments in the first place and take out a low interest loan; in the end you'll have more money borrowing for a car than if you paid cash for it.

If you have to take out a loan for the car, you can't afford it. Most people cannot afford to pay for a NEW car because they need to finance or lease it. The car is a rapidly depreciating consumption item. The only thing you should finance is a house. A house can hold its value or even appreciate in value. Used is perfectly fine and will allow for all cash purchase.

[shipo]

If you have to take out a loan for the car, you can't afford it. Most people cannot afford to pay for a NEW car because they need to finance or lease it. The car is a rapidly depreciating consumption item. The only thing you should finance is a house. A house can hold its value or even appreciate in value. Used is perfectly fine and will allow for all cash purchase.

And once again we disagree. I repeat, if the option is A) spend money on a car I could otherwise use on investments, or B) invest that money and take out a low-interest auto loan, option B is by far preferable.

[justbroke]

C) if you use a 0% loan option rather than taking money from a 401(k) or other investment vehicle (pun intended), then you are using other people's money.

[Zombie13]

Thank you for your insights, everyone, all valid points.
$5k is not realistically achievable at this time; if it were, it could possibly be enough to be confiscated by the trustee. This is why we would rather not involve the attorney/trustee unless absolutely necessary. Based on prior experience over the past 4 years, we've learned it's best to minimize communication with them. The small amount of funds we are currently accumulating are all part of the total income the trustee is already aware of. The modification was done in October 2020. So, the funds we currently have, should not be a 'surprise' to the trustee.

[shipo]

Thank you for your insights, everyone, all valid points.
$5k is not realistically achievable at this time; if it were, it could possibly be enough to be confiscated by the trustee. This is why we would rather not involve the attorney/trustee unless absolutely necessary. Based on prior experience over the past 4 years, we've learned it's best to minimize communication with them. The small amount of funds we are currently accumulating are all part of the total income the trustee is already aware of. The modification was done in October 2020. So, the funds we currently have, should not be a 'surprise' to the trustee.

I don't understand the concept of a trustee confiscating savings; that is, at least here in New Hampshire, a complete non-starter. Heck, at one point during my Chapter 13 I had over $10,000 saved up, which is how I bought my "new" car (which was 11 years old a the time) when my then current car died due to corrosion. The fact is, a Trustee has zero ability to look into your bank accounts, or under your mattress for that matter, to determine if you've managed to cut corners here and there and skimp save. To take this one step further, it is in the Trustee's best interest if those in Chapter 13 can in fact save some money for the proverbial "rainy day". Why? Because that gives the Chapter 13 it's best chance of success.

[Zombie13]

Thanks shipo, good point. When we started the process back in 2016, we had to send 6 months worth of bank statements for review. We had just sold the old house within that timeframe, and just bought the next one, before filing. So the attorney said, the trustee asked/stated: "You had $15,000 that you spent in one transaction... what did you do with that money?!?!?!?!" Sounded like a shout actually heh, the way it read. The 15K value, is an estimate; I don't recall the exact amount. Because of that, I have wondered, if they have authority to monitor, or get notification, on any kind of transactions, on any account, be it checking, savings, money market, loans, lines of credit, etc. For the record, the transaction was for a down payment on the current house.

[shipo]

During the run up to getting a bankruptcy approved, the Trustee has a wide range of powers to look at things to make sure there is no fraud in the filing; however, as I understand it, once the petition is approved, the Trustee is limited to what is spelled out in your agreement, and unless you do something to rock the boat, that is where his or her powers stop. Here in New Hampshire, my trustee was allowed to ask for my annual tax return, and then if/when something seemed amiss, he could then dig a little deeper. The only question which ever arose was in either 2018 or 2019 when I got a sizeable tax return, he wanted all but $1,250.

[Zombie13]

Dang that must've been some refund then!