New to Board, purchasing car question

[ac543]

I am new to posting on the board, however I have been lurking a couple of weeks.

I am in debt and am seriously considering BK. I would need to file a Chapter 13. I haven't contacted any lawyers yet.

I have a car that is on its last breath. It has over 180,000 miles and is costing me money monthly in repairs. My unsecure minimum monthly payments are so high I have been hesitant to get another car because I can not afford it and the unsecure payments. My credit is not good and the interest rates I have been quoted based on my scores have been really high. I have been paying my credit cards minimum monthly payments and have not used them except for gas, groceries in the past 90 days, they are maxed to the limits but not late. I do not know what to do about my car.

Since I am actually considering filing, would this be fraud if I were to get a car before filing or meeting with a lawyer? I don't think my car could make it for another 5 years. I commute 50 miles a day to and from work. I need reliable transportation and would not be purchasing an expensive model, I am actually considering possibly a used car to get me through 5 years. Would it be smarter to get a used car than new? Are there cars I should I not consider, even if used?

My biggest concern is since I am considering BK, I will get in trouble purchasing a car and then filing? I just want to get out of debt and hate the thought of having to take a loan for a car. Should I wait to file if I can and get the car now? How long after I purchase the car should I wait to file? I do not want to be fraudelant in any way. If this is something I can/should do how would the BK affect this car payment since it is less that the 910 rule I have been reading about?

Thanks for any advice. I enjoy reading ALL the posts here and think everyone is so helpful and nice to each other! I hope to gain knowledge to help me make the best decisions.

[BigJohn]

I am knew also, so what I say might be all wrong.

What I would suggest is to buy a new car and see if you can get the maintance prepaid with the package. Your interest now is high, but if you make your payments on time, you could get your car's payments included into the bankruptcy plan. If you do that, The car will be paid off sooner. The interest rate will be reduced and some of the money that you would pay to your unsecured creditors, will go to pay your car.

But as I have said, I could be 100% wrong.

[Flamingo]

If you are that seriously in debt right now, it is going to be difficult for you to obtain a loan on a vehicle at least at a decent rate. What BigJohn is describing is called "cramming" where a vehicle is "crammed" into a Chapter 13 plan at it's Blue Book or similar value and the payment spread out over the course of your Plan. The interest can either be eliminated or some interest included (as was in ours). We had two vehicles crammed into our five year plan, both 3 years old at the time of filing and each having 5 year loans.

Some other posters are more knowledgeable in the period of time before filing when a car must be purchased/financed in order to be eligible for "cramming" and can give you that time period frame. I feel your pain as to commuting - I travel 60 miles one way each day. Between my hubby and I, we figure we average $600 a month on gas and we have had to cut out other spending dramatically to cover the extra gas cost.

Best of luck to you....

[qwertysue]

Under the new bankruptcy law, a debtor may only “cram down” vehicles purchased before the 910 day time period before the filing of the bankruptcy. If a vehicle was purchased within the 910 days of filing, the vehicle payments cannot be reduced under the new bankruptcy law.

.

[cso5@]

Right, you would just pay for the car loan outside the plan. And that car payment would go into figuring you disposable income and your plan payment.
Of course, if it's way out of whack, like a really high car payment, I don't know how that works....

Having said that, though, I am two years into a 58 month plan....and I so SO wish I had "done something" about trading my car in, getting a different car, SOMETHING before I filed. Because right now it's being paid thru the plan (loan was older than 910 days) but won't run because it needs expensive repairs and I don't have the cash to fix it.

Grrr.

[JollyGG]

Actually it is often recomended that chapter 13 filers purchase a newer reliable vehicle before filing.

This is for two main reasons.

1. It reduces your disposable income. The amount of your car payment will figure into the means test and you will be allowed your whole car payment in your budget (assuming you get a reasonably priced vehicle).

2. It is very difficult to get a new vehicle while in a chapter 13 bankruptcy. So therefore you really do need something that will last all five years. Additionally, you won't have the disposable income to deal with car repairs and need something that isn't going to require constant expenses on repairs.

So. If you really need a new vehicle and you can find something you like and can afford go ahead and buy it. Just check your state's vehicle exemptions and make sure that your new ride doesn't have to much equity (assuming you are trading in or having a down payment) and check the IRS standards to make sure that your payment is within the allowable standards. Then just make sure you get some practical and reliable. It would look bad to purchase a luxuary model car right before filing.

[rrockinggramma]

Definitely go get a car. 5 years is a long time. You can include it but it would be paid in full, only the principal would be paid, not all that high interest. The trustee would set the interest rate. It might make the lender angry but he is getting paid in full so can't object. It will save you a lot of interest as well. I would do it.