Buying a car before filing?

[Yoshi]

Met for a consultation with a 3rd atty. Have not decided to retain him or not.

One of the questions I had for him was regarding cram'ing our two autos.
Since my wifes car is somewhat older we are concerned about having it for 5 more years. He recommended to let the car go and purchase a new one prior to filing. His reasoning was that once we file we wont be able to get financed on a new vehicle. I assumed after we file BK that our risk to the lender would be less and thought we would be able to get approved. I am concerned that if we cant get approved after filing that we will miss our window of opportunity to get a more reliable car. Also if we surrender the car in the BK and try and get approved but dont then we will ony have one car which will not work for us. We have children and need two cars.

Can anyone advise?

[rrockinggramma]

Buy one before filing. Your attorney is right. You will NOT get financed while ina a chapter 13

[destitute]

I had two attorneys tell me the same thing. My old car has $16,000 in negative equity. My credit was still good so I purchased a car before filing. I have lowered my payments by $300 per month and I'm also saving $75 per month in gas because my new car gets about 15 mpg better than the old one. The big thing to make sure of is that you don't end up with equity in the new car exceeding your state's allowable limits or you could lose it to the TT to pay creditors.

[Yoshi]

Thanks for the input.
Her current car is upside down a few K. We are not in a position to put money down on a new car so no equity. I'm waiting to hear from the dealer if we are approved or not. I'm thinking we wont be as our home foreclosed two weeks ago. We listed the house for short sale in Jan of 08. WE live in AZ and our home dropped in value over 140K. We had 6 offers on the house in the first month so we moved out. Thinking the house would sell we stopped the mortgage payments. The bank dragged their feet and the offers fell off over and over throughout the year. So 18 months later they foreclosed. If I only new I could of stayed in teh house for nearly 18 months mortgage free I would of stayed. It figures that when we relaize we have no choice but to file BK that the house forecloses a month before we file.

So having two cars financed and the negative impact on our credit from the foreclosure it looks like we may be keeping her car after all unfortunately. i dont think we'll get approved.

Hard to belive that we cant get a car financed after filing.

Thanks again for the responses. This forum is a tremendous help.

[lrprn]

Hard to believe that we cant get a car financed after filing.

You can't get a car loan very easily in Ch 13 because Ch 13 plans can be modified after filing if the filers' financial situation takes a turn for the worse. This is why the loan terms are so high on the rare deal when a 13 filer does find car financing during an active 13.

The high loan terms (APRs in the upper teens at least) are due to the high risk the lender is taking. This is why most car lenders will not finance a car during an active Ch 13 case, or if they will, the filer is often overwhelmed by the really bad terms.

This is very different in Ch 7 when right after discharge filers are flooded with auto lender offers. This is because Ch 7 filers can't file again for eight years, so in this case the lenders see this audience as much less risky to get their money back.

[Yoshi]

The dealer called and they are having some challenges getting us approved. They want to know why we are buying a 3rd vehicle. We have two currently financed and once approved we were going to surrender the misses car. WE told them we have a buyer for hers and it will go away once we get a replacement. I dont think their buying that excuse.
Anyone been in a similar situation willing to shed some advice?

Probably not much to do here and the alternative is to keep her car and take the chance it lasts.

Thanks again.

[optimistic1]

Working with dealerships and trying to obtain financing through them is often why people can't find financing to fit their needs.

There have been more than one person's on this forum who actually have obtained financing during the Chapter 13.

You cant go to dealerships, you need to go to BUY HERE PAY HERE type lots, not the big huge ones, often these shops will finance you themselves, for about $350 a month, which will be for a car about 10,000 and under.

[destitute]

Be very careful with buy here pay here lots. Many charge a downpayment that is close to or equal what they actual paid for the car. These vehicles are usually the worst out there that no other dealer would take.

[optimistic1]

True,

But what else are you gonna do if you cant get financing and your'e in a Chapter 13 without a car? Obviously it is gonna come at a price. The one I spoke with told me their cars are $5000, for $350 a month for 36 months. Do the math on that, you are obviously being ripped off. But most of the cars they have on their lot are decent vehicles.

Then their is straw buying which someone told me about on here, where you get a relative or close friend to co-sign with you on the loan, or even have them just put in their name, although I am not sure how you would pass that on to the trustee.

[destitute]

I understand the rock and hardplace. I was simply advising that you should be extra vigilant when choosing a car from a buy here pay here. If at all possible have it checked by a mechanic before purchasing.

[optimistic1]

No doubt, I was always wondered if those places even offer you a warranty. In my situation, I would probably have a rainy day fund, so if trouble happened, I could buy something off the side of the road and hope for the best. I would hate to come crawling back to my parents to ask for help.

If I am ever in need of trying to find a car, I still would go the dealership route to see if they could help first, the buy here pay here place is like the absolute last resort, next to taking the bus.

[woeisme]

We financed a car while in CH 13, just last month. It is not easy, and the interest rate sucked (18%). Well, I wouldn't say it was real hard to find financing, just that we had to go with a buy-here-pay-here place, and that we had to have a good down payment. We didn't get ripped off too badly I think, we had a mechanic check out the van and it came up clean, only has 58K miles on it, and overall costs, including financing, was $7200 (blue book was about $6500, so $700 to finance us in a CH 13 isn't too terrible I think). The big key is we had to put down $2500, pretty much all we had in savings, although I worked an extra job the past few months so have about a grand in savings for emergencies again. So it can be done, just you might need to save well in advance for a downpayment and plan on a high interest rate. Good luck!

[optimistic1]

$2500 down is insane for a down payment, there would be no way for me to pay that if something happened, I would probably just go buy a car on the side of the road. But I am sure that every place will have different policies on it.

[TBLTZ]

The dealer called and they are having some challenges getting us approved. They want to know why we are buying a 3rd vehicle. We have two currently financed and once approved we were going to surrender the misses car. WE told them we have a buyer for hers and it will go away once we get a replacement. I dont think their buying that excuse.
Anyone been in a similar situation willing to shed some advice?

Probably not much to do here and the alternative is to keep her car and take the chance it lasts.

Thanks again.

I just bought my 3rd car finaced and didn't even ask any questions. If they did I would have paid off my one car that has a year left on the loan. But gave it to me with out a problem. i will be turning in my other car at bk. I would tell them you just need it. If it looks like you can pay for it they shouldn't question it.

[BkinTX]

I know this may be a stupid suggestion (sorry!), but have you considered buying an inexpensive used vehicle with cash?

Ala Dave Ramsey, you should be able to put the money you would spend on payments back each month and continually purchase upward, paying in cash each time.