Surrendering a car questions

[OceanDreams]

Has anyone decided to surrender a car in ch 13…to make the payment less? (Due to less payback) how did it work?

[OceanDreams]

No one gave up a car in bk? I’m surprised….

[justbroke]

For a Chapter 13 you would loose what I call the buffer. When you have a car in a Chapter 13, you get to pay for the car while you also get the "operating" allowance. The operating allowance can be from $289/month to $404/month. If your insurance is low and your operation of a "newer" vehicle is less than the $289-404/month... that's money you can save; what I call the buffer. If you have two vehicles and a family, that could mean even more buffer you have in your plan.

So, it's uncommon for a Chapter 13 debtor to voluntarily surrender a vehicle for the sake of their plan. Anyone will tell you that it is 100% better to have a newish vehicle when entering a Chapter 13 and to have the plan pay for both the installment payments and get that buffer from the operating allowance!

If you have a bunch of DMI it's better to use the DMI to pay for a car than to just give it to creditors.

[OceanDreams]

I wanted to post for others in case they are in same boat….having 2 cars increases our payment by $400 a month above the calculated payment ….so we have to pay that additional money to keep the. 2nd car. We have been paying on it for 7 yrs (lease to buy) and don’t want to pay for 5 more so….we are surrendering the older car. If we had known ahead of time. We would not have bought a new car knowing this…but at the time the payment was coming in higher and we thought it would be a wash. Error was I didn’t list HELOC as a mortgage but as a debt….so that HELOC payment made our payment go down. I sort of blame lawyer too but he is good and we have used him in the past.

so just waiting now to see how it works….the lender is Ally…if anyone has experience with them thanks 😊

[justbroke]

I clarify a little only because you are talking about surrendering a second car. There are two major reasons to surrender a second vehicle: (1) the vehicle isn't allowed or (2) you want a second vehicle even though it's not allowed.

In most cases, having a second car -- that is allowed by the bankruptcy code -- usually doesn't increase the cost of the plan unless the debtor has no disposable monthly income (DMI) or not enough to cover the car(s). Vehicle leases are a special animal and complicate the formula. I kept a second car -- for the spouse -- because it allowed me to pay it off and have the additional ownership allowance. That vehicle was an allowed vehicle and I had DMI to cover the vehicle.

Chapter 13s are special and each case is an individual one. That's why we usually don't make blanket statements about what someone will pay in a Chapter 13. It's too difficult to calculate the plan payment. Lawyers use software to do the bulk of the work but still have to make some adjustments and make decisions on how to make the plan work.

For a debtor with a family two cars are typically allowed. If your plan is infeasible with two vehicles then surrendering one may be the better option.