Selling my car during 13

[Gonebroke]

Hello all, tons of great information on here. I have a few questions, I am going to be filing a chapter 13 so I can keep both of my cars, one I own and the other I am about to also. The question is can I sell my cars while I am paying my trustee? Can I trade them in on a new car or do I have to keep them for the 36 months. Also I did not realize that the case doesnt get discharged until after the 36 months, so then again do you have to watch everything you spend your money on over the time?

[lrprn]

Hello all, tons of great information on here. I have a few questions, I am going to be filing a chapter 13 so I can keep both of my cars, one I own and the other I am about to also. The question is can I sell my cars while I am paying my trustee? Can I trade them in on a new car or do I have to keep them for the 36 months. Also I did not realize that the case doesnt get discharged until after the 36 months, so then again do you have to watch everything you spend your money on over the time?

A few questions for you to answer first so we can help you sort things out better....
- What state do you live in? Have you lived there for the last two years?
- If you look back the last six months (April 1 through Sept 30) adding up all sources of income, what was your total income?
- Are you married? Is your spouse filing with you?
- Do you have kids or other adults who are living with you? If yes, how many of each?
- Who owns the cars?
- Whose name is on the cars' titles?
- What is the approximate true value of each car right now?
- How much do you still have to pay on the car that's almost paid off?
- Have you met with any bankruptcy lawyers yet?

You may not be aware, but you typically don't get to choose which bankruptcy chapter you file. There's a mandatory Means Test you have to complete to find out which chapter (7 or 13) you qualify for.

And these days if you qualify for a Ch 13 and your income is above the median for your state and family size, most plans are set up to run 60 months, not for 36. Only below median filers get to have 36 month plans these days.

Once you share a little more information about your situation, we'll do our best to help you figure out what's possible in your situation and what isn't.

[Gonebroke]

There is me and my wife and one child, I am in Florida, and have lived here for 20 years. I did go meet with an attorney today and my income was low enough that I could file chapter 7, also we are filing jointly. I have no asetts except the cars. I sold everything in my house pretty much.
He said I can only keep the cars if I did a chapter 13, if I did a chapter 7, I would have to surrender them or keep them and pay back the trustee with a 12 month payment plan. The cars are only worth about 6,000 each, I finally got them paid off after 5 years of payments and didnt want to just lose them. One is in my wifes name and the other is in my name.
I was shocked that he told me my payment for the chapter 13 would only be $120 for 36 months. He said it has nothing to do with how much you owe but how much money in assetts I had. That seems like a great deal to get out of 55k in credit cards and a repo of 13k. But nothing is set in stone yet.
My main concern is do I have to keep these cars until this is discharged in 36 months? Can I ever trade them in for something newer? I dont know if they'll last another 3 years. He also mentioned I cannot pay the trustee off early but a relative could do so out of good faith? I wish I asked if if the relative had to pay the full 55k or just the remainder of my payment plan.
This forum has been so much help so far, thank all of you

[rrockinggramma]

others may differ but if the cars are free and clear and they are listed etc but not a part of your plan in pay back etc then I would think you could sell them for cash. To purchase another car however, you would either have to pay cash or if you finance get permission from the trustee to do so. However finding a lender in a chapter 13 is next to impossible. But strictly cash transactions, I think you would be ok.

[slickwilly95991]

others may differ but if the cars are free and clear and they are listed etc but not a part of your plan in pay back etc then I would think you could sell them for cash. To purchase another car however, you would either have to pay cash or if you finance get permission from the trustee to do so. However finding a lender in a chapter 13 is next to impossible. But strictly cash transactions, I think you would be ok.

Regardless, you would need to get permission from the court. The theory is, if you have extra money to save up and buy or trade up to a new car, then you have extra disposable income to pay into the plan. However, I haven't seen where a court will not allow a debtor to buy a cheap car with cash.

[Flamingo]

I was shocked that he told me my payment for the chapter 13 would only be $120 for 36 months. He said it has nothing to do with how much you owe but how much money in assetts I had. That seems like a great deal to get out of 55k in credit cards and a repo of 13k. But nothing is set in stone yet.
My main concern is do I have to keep these cars until this is discharged in 36 months? Can I ever trade them in for something newer? I dont know if they'll last another 3 years. He also mentioned I cannot pay the trustee off early but a relative could do so out of good faith? I wish I asked if if the relative had to pay the full 55k or just the remainder of my payment plan.
This forum has been so much help so far, thank all of you

We went into a 5 year plan with 3 year old cars. Believe me, we had many sleepless nights worrying about major repairs, tires, etc. With proper budgeting and saving during a Chapter 13, we set aside enough money to pay for the repairs or purchase the tires when the time came. It can be done but you need to take very good care of your vehicles and it helps if you have friends or family that do car repairs. To purchase or sell a vehicle during a Chapter 13, as the others state on here in their responses, you need Trustee permission to do either. Purchasing a vehicle during a Chapter 13 is extremely difficult, but not impossible. It becomes easier when you are discharged. As to paying off your Plan early, if that is done prior to the end of your plan (3 years), your relative in all probability would have to pay back 100% of your Plan, not the total of the $120 x 36. Never hesitate to ask your attorney any questions during the entire BK process. You are paying him/her for his/her services and representation and he/she knows your entire financial situation. Chapter 13 is not the end of the world and to survive it major lifestyle changes have to occur; you just will not be able to do what you did before and will have to learn to live on a cash only basis. That is where the budgeting comes in that I mention above as to car repairs, etc.

[Gonebroke]

Thanks for all the replys, but after reading everyones experiences with chapter 13's, I think I would much rather just lose the 2 cars and go with a chapter 7 and get the process over and then move on with my life and start over. I just cant see being locked down like that for 3 years.

[SinkingFast]

You'd have to be in the Plan for a year, with on time payments, AND get Trustee approval to seek new financing for a car. If you go the Ch 13 route.

If you go Ch 7 and wind up surrendering the cars, the Trustee will have to pay you your Exemption amount when the cars are sold. FL is $1K for a vehicle and I don't know if you get to double that filing Joint. You'd have to ask.

Also, you might be able to qualify for a 722 Redemption Loan in Ch 7. It's a special loan program for people filing Ch 7 to purchase a replacement vehicle. Something to ask attnys about as you Consult around.

[JollyGG]

Could he sell the cars for fair market value to someone who is not an insider. Buy or finance (depending on disposable income) a car that falls under the exemptions. Then use the rest of the money from the sold cars to catch up on neccessities that have probably been neglected such as doctors visits, dentist visits, home repairs, ect. Then file?

[SinkingFast]

Could he sell the cars for fair market value to someone who is not an insider. Buy or finance (depending on disposable income) a car that falls under the exemptions. Then use the rest of the money from the sold cars to catch up on neccessities that have probably been neglected such as doctors visits, dentist visits, home repairs, ect. Then file?

We sold a truck about 6 months prior to filing. We needed to sell quick so we went to a local dealer who paid us cash on the spot. We used the proceeds to pay the IRS taxes we owed for tax year '05.

Our attny said, the Trustee wouldn't be happy about loosing an asset to sieze, BUT, the Trustee was not gonna go back to the IRS for the money either. We saved the Bill of Sale from the transfer of the truck. Our bank statement showed the check deposit into our bank acct and a corresponding withdrawal to pay our taxes.

But yeah,........ If the roof is leaking, or they need to go to the doctor or dentist, or something like that,........... Selling to a disinterested party is definitely an option. Some things you gotta do for the health and/or safety of yourself or your dependents. Just be sure to document, document, document.

But,......... The one major draw back I can think of to doing this is the OP's credit. The potential interest rate that they might pay on new car loans.