Auto Loan and Chapter 13

[ccahill1]

Hi..
Currently my husband and I have an auto loan...I am the first signer on the loan because when we went to buy he was having credit issues..anyway, I have filed Chapter 13 and my husband didn't. My attorney (not the best choice I am afraid to say) told me not to include it in my bankruptcy as both are names are on the loan, so I didn't. (I have come to find out that it needs to be listed) I called the loan company the other day and found out they know about the bankruptcy. The person I spoke with said the loan is now protected under the bankruptcy umbrella. Now, I didn't include it in my bankruptcy based on the advice of my attorney, however he is adding it now. Initially he told me that the payments couldn't be paid through the Trustee as we both didn't file bankrupcty but the loan company filed a claim and want to be paid by the trustee....Who is right and what is the best way to handle this debt? We owe more on the truck than it is worth.

Any feedback is greatly appreciated.

[SMinGA]

When you file BK, you 'file' on all debts. Joint or not. The question here seems to be whether it is to be paid thru your plan or outside of the plan. If you have the option of doing it either way, then you need to figure out which way is best for you.

Do you know what rate was the car loan originally charging? What % does your trustee keep? What is the rate on auto loans if included in the plan? (Also called the till rate.)

For the last 2, you will probably need to ask your attorney.

To figure out which method (in or out) will cost you the least, you need to know those details. Any payments made thru the trustee incur a fee to the trustee. Such as if your trustee's rate is 8%, then for every $100 you pay only $92 gets paid out. And if paid thru the plan, car loans are generally paid at the till rate which is probably 4-7%. If your current auto loan rate is not too bad, you're better off paying as you have been. If its high however, you may be better off paying thru the plan.

The fact that your husband is on the loan and did not file has no immediate importance since you intend to pay the car one way or another. It ultimately would matter if you wanted to give the car back... He would be responsible for any balance remaining, you would not.

[ccahill1]

Thank you! Yes you are correct that my question surrounds the addition of the debt surrounding the auto loan.

So even though the loan is in both our names, me being the primary borrower, I can include the debt in my Chapter 13 Bankrupcty? I know the interest rate is at 16% - 18% right now. As I said my attorney makes it sound like I can't include it in my bankruptcy since there are two names on the loan but since the loan company filed a claim it seems that they are expecting the monies to come from the court in the future.

Am I on the right track?

Thank you for taking the time to answer my question. I certainly appreciate it.

[NoTomatoCan]

It's not a matter of whether you can or can not include the debt in your BK. You MUST include it. You have to include all of your debts in a BK.

Make sure you aren't confusing including your debt in the bankruptcy with including your debt in your payment to the trustee. All debts have to be included in your BK, but not all debts have to be paid through the trustee.

[ccahill1]

And who determines how the debt is paid? The Trustee? The creditor?

[SMinGA]

It really depends on the district. Some seem to require it be paid in the plan (thru the trustee) if you're behind on the auto loan at the time of filing. If current, it may be optional. It does not sound like your district requires it to automatically be paid in the plan - or you'd probably have heard from the trustee on it.

Filing a claim does not mean they expect to be paid in the plan. Its not really about what the creditor expects, anyhow. If you have the option of in or out, its about you making sure to get what is in your best interest. If you do not have an option, its about doing it the way your district requires.

Keep in mind that if you amend to pay it thru the plan, it will increase your plan payment. Such as if you're paying $300 car payment and proposing $500 plan payment, you'll pay $800 to the trustee if you pay the car thru the plan. (Since moving the car into the plan adds the car payment back to your DMI.)

And who determines how the debt is paid? The Trustee? The creditor?

[ccahill1]

One more question..I promise (hopefully)..And thank you to everyone who has responded..My car payment is now $420 and my plan payment is $140/month. I thought (usually my problem) that the interest rate would be lowered if the truck is in the plan; therefore lowering the monthly payments..is that not true?

[SMinGA]

You would pay $560 per month. The car loan may get less interest but the difference would go to trustee and unsecured.

One more question..I promise (hopefully)..And thank you to everyone who has responded..My car payment is now $420 and my plan payment is $140/month. I thought (usually my problem) that the interest rate would be lowered if the truck is in the plan; therefore lowering the monthly payments..is that not true?

[val4747]

Please look at my Post val4747.

I am so frustrated right now. Everyone has different ideas based on the district trustee choice on whether or not the car payment goes into the plan.

First let me answer the question in regards to the Creditor. They can not make you choose which way the car is to be in the payment plan. Why would they anyway if you are paying 16%-18% on a car loan the creditor would be crazy to ask for it to be included in the payment plan because they won't make money off of you. This is what bankruptcy is all about with auto loans.

After you read my post you will learn that I am in the opposite position. My interest rate on my car loan is 4.0%-5%. Since my trustee states that my car loan must be in the payment plan ( I am not late never have been.) my interest rate would be 7%-9%. That is why I am fighting it. Not only that but I have already paid 2 years on the loan. If it goes into the payment plan I am adding another 5 years.

I want my auto loan outside of the payment plan. I can file a motion for it too stay out. But, why would I have to go through all this and I have to pay for this motion to just leave well enough alone.

On top of that once my car loan company was notified they sent a letter back to the attorney saying that I can no longer use my on line bill payer. All kinds of running around now buying money orders, cashier cks and the auto company not taking it from the bill payer. Sounds strange to me.

I went into Chase to make a payment cash (for my mortgage) before my 341 meeting and they refused my cash through there own bank. But, yet if the Trustee gets the cashier ck or money order from me they have to turn around and wire transfer the money directly to Chase. Don't get it.