CH 13 odd advice from attorney to buy two new cars in order to lower plan payments

[tinman]

My sister and brother-in-law recieved their plan proposed payments last week of $2300.00. They were told by the attorney that they would have no problem getting rid of all their debt including their home equity line of credit for $85000.00.
The odd thing was the attorney told them that they could lower their trustee payments be incresing their monthyl debt payout by purchasing new cars. So my sister and her hubby took their perfectly good running cars that were COMPLETELY paid for and traded them in for two brand new vehicles that are lavish and have a combined cost of 46,000.00.

I find it odd that a judge would not question why they are filing bankriptcy saying they can not pay their bills THEN run out and dig a bigger hole of debt.

Is it just me or is this ABSURD? Did she receive bad advice?

[whirlwind123]

Maybe the attorney felt that her cars were older and wouldn't last thru the bankruptcy of 5 years before discharge. From my understanding you would not be able to get any credit while in bankruptcy., which for 13 is 5 years., also whatever their payment is they cannot get more credit for it than $489.00

[tinman]

Cars

Hi,
Well one of the cars was a 2004 and the other was a 1997. Not really old cars I would say.....
I think they believe that whatever their car payments are is what they will save! They now have new payments of almost $1000 for both cars!

The attorney had not formally filed yet, told them to get the cars before he files this week which they did.

[LimpDisc]

It's not that uncommon for people to get their transportation needs in place prior to BK.

I don't think the attorney was allowed to give them that advice, but I'm sure that's done quite often.

[JimKutkowski]

It's not that uncommon for people to get their transportation needs in place prior to BK.

I don't think the attorney was allowed to give them that advice, but I'm sure that's done quite often.

When a proof of claim comes in higher than expected, then what? Their Chapter 13 cases blown up because they bought a car they couldn't afford, brilliant!

I can't believe some of the stuff I hear on this board, it must be the wild West outside of Pennsylvania.

[LimpDisc]

When a proof of claim comes in higher than expected, then what? Their Chapter 13 cases blown up because they bought a car they couldn't afford, brilliant!

I can't believe some of the stuff I hear on this board, it must be the wild West outside of Pennsylvania.

If their plan payment prior to buying the cars was going to be $2300, how can they not afford the $1000 monrhly car payments? Am I missing something? Would their plan payment not go down with the newly added expenses?

I'd rather pay $1000 monthly towards the new cars instead of my unsecured creditors.

[woeisme]

Doesn't matter what the proof of claims come in as, as long as they are unsecured, the payback amount is the same, based on disposable income, not a set %. This is a very useful planning strategy for CH 13 filers, not bad advice at all. Wish I had done the same rather than have to try to find someone to finance me mid-plan and do all the paperwork for incurring new debt with the trustee/judge.

And really, a 5 year old car and a 12 year old car as being "perfectly good running cars"?? That both would last another 5 years (making them 10 and 17 year old by plans end!) is the real absurdity here! Sounds like they had some great advice from their lawyer to me. Why pay that $ to unsecured debt, and then have car troubles down the line that set you up for plan failure, when you can spend it on much more reliable transportation?

[liz417]

I was given the same advice by my 1st attorney, although your attorney can't advise you to take on more debt, this strategy is often done to lower monthly ch 13 payments. Although, I ended up in a ch 7, my new car payment was never questioned.

[walkthaplank]

As long as the car payment is paid outside of the CH13 plan it will also reduce the amount paid in trustee fees (which is what I think the OP was saying). Trustee fees are reduced (based on 10%) from $230/mo to $130/mo and less is going to the unsecured creditors. Based on the combined payment being less than $1000 should put them right around $489 each. Insurance costs will go up, but that payment won't be questioned and also not included in the trustee payment trimming down fees a bit further. Now these folks aren't likely to be scrambling to find money for car repairs during this period either. Sounds like good advice.

[pcn]

Search "buying a new car" and you will find this is the standard as far as bk planning. Get reliable transportation while you have good credit, or wait until you are forced to replace one when you have poor credit and are mid-bk - there really is no decision to be made. As far as if the atty can advise this, I have read there was a recent ruling that opened things back up as far as what an atty can advise. It had to do with their 1st amendment rights. The idea that they should not be able to advise their clients what is in their own best interest is rather absurd, isn't it?