Question Are credit scores "real" while in bankruptcy?

[AndHereWeAre]

We've been in C13 since April 2020.

Initially, our credit scores tanked some but now mine, for example are:

TransUnion: 697
Equifax: 716
Experian: 618

Now I know anything below 700 is not good (we used to always be above 700 for all) and in fact several months ago I was turned down for a secured credit card my bank sent to me that was supposedly pre-approved.

That being said, even if they were all above 700 does it really matter?

Right now, aren't reasonable rate lenders going to simply say "C13, nope!", regardless of what our scores are?

I ask because we are looking at buying out our lease and so are searching for financing. I kinda think no matter what our scores are, we will only be able to use sub-prime lenders and they will give us the worst rates they can simply because no one else will touch us.

So do scores matter while in C13 or actually not?

Thanks!

[flashoflight]

Anything above 670 is very good for a non-discharged chapter 13. Of course lenders will probably be using your auto enhanced FICO scores and not the regular scores.

If I were in your shoes, first I'd look to see if NFCU or Penfed will do an auto loan refinance with an open 13. Otherwise ask your lawyer for a list of BK friendly lenders. This comes up enough so they should have a list. You'll probably need to get approval from the trustee and/or court to do this so let the lawyer know you're trying to buy out your lease. You will need to modify your plan to account for the new auto loan payment and hopefully the new payment won't cause trouble with your plan.

[AndHereWeAre]

NFCU is not an option as no military affiliation. Never heard of Penfed but will look them up.

We were considering asking my father to co-sign but that does not change anything - any debt over 10K, even co-signed will have to be run by the trustee and court our attorney says but we are very leery of opening that door as have read here from folks sometimes the trustee takes it as an opportunity to do a complete review of you.

Thanks for your help!

[shipo]

PenFed is short for Pentagon Federal Credit Union: https://www.penfed.org/

[justbroke]

Welcome to BKForum.

If that's a FICO score, then it is real. The reason is that people with a bankruptcy in their credit profile are compared to other consumers who also have a bankruptcy. This means that you are bucketed. As flashoflight mentioned, anything over 670 is actually good (FICO says that 661-780 is good, but that's sometimes broken down to 661-739 good and 740-780 as very good).

The kicker is, as flashoflight mentioned, is whether being in an active bankruptcy (Chapter 13) is going to require a more friendly lender.

But back to my real question... why do you want to buy out the lease now? Is it ending soon? You definitely need transportation so I don't see the Chapter 13 Trustee squabbling. If there is any issue it is as you say, where does the money come from if it's over a certain amount. (Here in Florida, we can't incur any new debt without permission.)

I also agree with flashoflight that your attorney may already know BK friendly lenders or those that will loan inside a Chapter 13. Plus, your loan is not a simple refinance and is a lease buyout. Slightly different but not all lenders to lease buyouts.

[Carmella]

As we usually say talk to your attorney.

I am going through this process and the attorney has a form with everything spelled out. Since my car was totaled it should go through the trustee/court without a problem, but might take over 60 days. There is certain information they need. At the dealership I asked if they handle active 13 not all dealerships do. The attorney had a list for me, but I wanted to stay where I was comfortable. If they did not deal with BK 13 I would have gone elsewhere. They took my info and I got two banks that offered to finance me. The interest is high one was over 20% so they did not even bring that one to me the other was 13.7% which I think is GREAT since we are active BK13. The bank sent a list of what they need including wanting the court order.

Now I had to submit it to the attorney and wait. I had to sign a form and it will cost $350 paid through the BK plan.

If you are buying out the lease (this is what my attorney has in their letter I know it may not apply to you/your state, etc, but I want to share the info) If replacing the lease you need to send the proposed financing, interest, number of years, proposed payment, year, make model, source of down payment if you have one. If you are getting a new lease there is more info including proof of income with several pay stubs, letter stating how you intend to pay/budget

Definitely find out what you need to do so you have all your ducks in a row.

I don't the the credit score really mattered in our case. A credit check would show we have been current on our two car payments and they wanted recent pay stubs. We also kept current on the house payment before and during BK.

justbroke
I don't know if this is this is @AndHereWeAre's situation, but a friend of mine bought out her lease (to car loan) because the dealer called her and the fact is during this time there are very few cars available and even if you wanted to turn it in and get a new car there's slim to no pickins. Plus I believe it was a "sale" for the salesman converting from lease to loan right now they don't have many cars to sell so I am not shaming the salesman because we all have to make a living. The dealership I went to had only one car in the showroom new and there were 3 used cars in the lot that is usually overflowing. (they might have more in their back lot, but that's all they had to show in the lot). It does worry me since I NEED a car and it looks like they will hold this one for me, but I am not thrilled to buy a car that's going to sit on the lot as it gets cold/snowing while awaiting the court system.

[justbroke]

Most leases, even with their residual value, are better than what a used car sells for these days. My old 2003 Mountaineer was worth $3,000 last year, and now it's at $6,000!

[AndHereWeAre]

But back to my real question... why do you want to buy out the lease now? Is it ending soon? You definitely need transportation so I don't see the Chapter 13 Trustee squabbling.

Thanks.
Have to if we want to keep it as lease ends in Feb '22. In NC, anything over 10K in new debt needs to be run by the Trustee for approval. Our attorney advises that could take about a month to do.

Just concerned the trustee may take it as can opportunity to also review us from top-to bottom again. We haven't done anything wrong but we want to be very careful.

Our attorney seems to think the approval will be rather pro-forma as long as the payment amount is not any more than what we currently pay for the car...

[AndHereWeAre]

source of down payment if you have one

We are planning to sell some crypto for this. But we're a bit concerned.

We declared all the stocks/crypto we had at the time of filing but in the past 1.5 years have managed to buy a bit more. Some of those have gone up significantly so we would liquidate partially in order to have a down payment. Don't want to give the wrong impression to the trustee, however, that we are sitting tremendous wealth. Again, everything was declared at the time but we bought more and some went up since then.

very few cars available and even if you wanted to turn it in and get a new car there's slim to no pickins

Exactly, our buyout is ~35K and we want to put 10K down. That should allow us to keep the same payment or perhaps less. Three options we see are buy ourself, buy with my father as co-signer or ask my father buy out the lease for us and we make the payments to the bank for him.

[justbroke]

Our attorney seems to think the approval will be rather pro-forma as long as the payment amount is not any more than what we currently pay for the car...

Most of the time, it is a simple form that you complete with the Trustee and isn't a big deal. Your attorney would know more about how that particular Chapter 13 Standing Trustee likes to deal with vehicle replacements/purchases.

[flashoflight]

We are planning to sell some crypto for this. But we're a bit concerned.

We declared all the stocks/crypto we had at the time of filing but in the past 1.5 years have managed to buy a bit more. Some of those have gone up significantly so we would liquidate partially in order to have a down payment. Don't want to give the wrong impression to the trustee, however, that we are sitting tremendous wealth. Again, everything was declared at the time but we bought more and some went up since then.


Exactly, our buyout is ~35K and we want to put 10K down. That should allow us to keep the same payment or perhaps less. Three options we see are buy ourself, buy with my father as co-signer or ask my father buy out the lease for us and we make the payments to the bank for him.

This part is trustee specific and you need to lean hard on your attorney's experience and expertise. If your attorney says it will be OK and you trust him, then it will be OK and you probably don't need to worry at all and read anything more beyond this point.

In my district, $25k is not going to fly but maybe that has changed in the last year due to inflation and your lawyer is not in my district and he says it will be fine. The payment being the same doesn't help or hurt. When your lawyer built the original plan, the trustee already factored in the early lease completion to calculate the overall plan dividend to unsecured creditors while you walk to work and walk home from the grocery store to help pay Citibank lol. If the new dividend is still higher than the minimum dividend required from the means test, you are good to go. If it is lower, then you are in trouble because the plan doesn't have enough buffer for unsecured creditors.

The gains from crypto is potentially a problem because realized gains such as gains in Schedule D of your 1040 are not exempt from the BK estate. But you need a car and $10k won't be enough to buy a car nowadays due to inflation except for the junkiest of cars these days. You'll be ok there. But if the trustee catches wind that you've been investing new paycheck money into stocks and crypto and that investment is not in your schedule J, then the trustee would want to increase your plan payment because you have disposable income not paid to the plan. But how is the trustee going to know you put in new money into stocks and crypto? Schedule D doesn't show it as long as the purchase date is pre-petition. Heck, even increased 401k contributions don't show at all in an electronic 1040 filing. As long as you make your payments on-time and don't poke the bear anymore, you are good to go.

[AndHereWeAre]

When your lawyer built the original plan, the trustee already factored in the early lease completion to calculate the overall plan dividend to unsecured creditors while you walk to work and walk home from the grocery store to help pay Citibank lol. If the new dividend is still higher than the minimum dividend required from the means test, you are good to go. If it is lower, then you are in trouble because the plan doesn't have enough buffer for unsecured creditors.

Well, I DO need the exercise...

But we didn't include the lease or our mortgage as part of the bankruptcy and have continued to make those payments separate from our monthly bankruptcy payment to the Trustee.

And you are right, 10K want get you anything these days car-wise...

And thanks very much about the crypto advice!

[shipo]

And you are right, 10K want get you anything these days car-wise...

Oh, I can think of several cars which would be good reliable rides for $10,000; I have one of them, a 2006 Acura TL which I bought in the middle of my Chapter 13. Well maintained these cars are typically good for 300,000 miles and can be had for under ten grand, often well under; here's one example (an automatic version of my car, same year and color; the only obvious flaw is the cracked dash): https://www.autotrader.com/cars-for-...ckType=listing