Buying a car during Chapter 13

[cspa522]

My DH and I will be filing at the end of next month (I hope) and I have a question about buying a car during Chapter 13. I've searched around the forum, but most of the information I've found has really been concerning Chapter 7.

Has anyone had a good experience buying a car during Chapter 13? My car is 8 years old, and something seems to die on it every year. This year it was the air-conditioning. Before we file we're getting new tires because it needs them and also to get rid of some of the cash we have on hand.

I've seen information about Roadloans, and figure we'd pursue that avenue when this happens. I'm hoping we can get another 2 years out of the car.

What kind of rates have you been offered, and what kind of limits? I don't want to replace a clunker with another clunker. We drive our cars until they die, and would want another vehicle (reasonable, not a Benz or anything) that can do the same. Used is fine, don't care about any of that.

Wondering how much you were authorized to spend, etc. Any comments are appreciated!

[NoTomatoCan]

Keep searching the Chapter 13 forum... tons of great posts about purchasing a vehicle while in a chapter 13.

HOWEVER - you state that you are going to file next month. There are even more great posts that will tell you that if you do not have reliable transportation now, you need to get it. If you can at all help it, do not knowingly enter into a CH13 with a vehicle that will not last the duration of your plan. You still have some time...

If you wait until you enter your CH13 you will need the trustee's permission to get any type of financing. Then, once you do get permission (which can take some time - the BK world moves slowly) you will find that your financing options are very limited.

Having reliable transportation going into a CH13 is one of the most importatnt pre-BK planning tips.

[spidge]

I have the same question, but I would like to buy something for a recenet high school graduate for cash.

For me, I have a fair sized 401K payment and when it matures would like to buy a car to as mine are 7 and 10 years old. The 10 year old is actually in fairly good shape and will consider giving to recent graduate. Since my projected BK13 payment is barely above minimum for a 13 I would think the trustee would want some of that but allow half for a car.

The trustee does want us to succeed, correct?

[cspa522]

We're pretty certain we won't qualify for anything right now, given that we haven't paid a credit card in 15 months and are upside down on our house, and have 10,000 left on our 2nd car. We just can't afford to take on a car payment right now, and I don't want to wait to file.

I'm pretty sure the car will last use at least another 3 years, if not longer. I hope, anyway. I was just curious what kind of rates and spending limits other Chapter 13ers have received, just to get a ballpark idea.

[Flamingo]

Please keep in mind that you are filing bankruptcy which makes you a very high credit risk for a long time. It may or may not be possible to obtain a car loan during a Chapter 13; do a thorough search on this in the forum and you will find most people cannot get a loan and those that do cope with very high rates. Also, trustee permission is needed during a Plan for a car loan or to obtain any credit. The best thing to do in a situation such as this is to discuss thoroughly with your attorney who can also probably give you the names of dealerships in your area that may work with those in active bankruptcy. Best of luck to you.

[momofthree]

When you have a car payment in a ch.13 bankruptcy, then that number is figured in when calculating your dmi, therefore, rather than increasing your payment, it will usually just decrease the amount of money that goes to unsecured creditors each month. This is assuming that you have dmi.

On the other hand, if you already have next-to-no dmi, then what do you hope to gain from filing ch.13? I can almost guarantee failure if you go into the plan with unreliable transportation and have a car die a year or two into your plan. If you think you can't afford a car payment now, or will have a rough time finding financing NOW, you will find that it is 10 times more difficult or even impossible when you're in an active ch.13.

Also, someone correct me if I'm wrong, but if you finance a car before entering your ch.13, the court will reduce the interest rate to till rate in order to free up more money for your creditors. This is something that cannot be done when you buy AFTER filing. In other words, it doesn't matter what rate you get financed at, it will be reduced. 22% doesn't sound so bad if you're only going to be paying it for 2-3 months (until you file) rather than 60 months.

[cspa522]

Momofthree - that's a good point, thanks. I shouldn't have said that my car is a clunker because it's not really. We were planning to replace it in two years or so. I don't think it's going to out and out die, but I do forsee it needing more than average maintenance in the next 2 years. I hope I'm wrong.

I suppose we can try to see about getting a car loan before filing, but then don't we have to put off the filing for 90 days? We're filing Chapter 13, and want to pay off the car and mortgage outside of the bankruptcy.

[cspa522]

Something else I'd like advice on -

We settled 3 credit cards with a debt settlement program, which we will be dropping out of shortly, as we're going to file bankruptcy. Our attorney told us if we filed before the end of the year, she can have the difference between the owed amount on the cards and the settled amount washed out in the bankruptcy and we wouldn't have to claim that money as income on our taxes for 2010. This total amounts to about $24,000 that we'd be claiming as income.

If we buy a new car, we'll have wait 90 days before filing (I'm assuming, unless there's a way around that). Is the attorney correct that as long as we FILE before the end of the year we can get that $24,000 dismissed, or does the case have to be CONFIRMED by the end of the year for that to happen?

That cuts things awfully close for us. Even if we got a new car this weekend, that means we couldn't file until November 27th. If all we have to do is file by then, no problem. But if we have to be confirmed by then I don't see that happening.

I've put in a call to the attorney, but you guys are usually quicker to respond than she is! Thanks!

[momofthree]

You don't have to wait 90 days after buying a car. It is usually recommended that you make at least 1 payment first to show good faith, but it's not required. You do, however, have to pay back the full amount of the loan you take out, which is why you don't have to wait before filing.

[Okieblue]

Trying to get a new vehicle, went to a dealership and they lied, so they got their vehicle back, we were at 6% on it, now am trying for a different vehicle, but our credit is shot, I really want this new vehicle too, we walked out thinking we got approved at 6%, don't care, go up to 9%, just approve us. Our other car is 5 yrs old, has a speedometer problem, a dent in the front, and 52K miles on it, but will be paid off in 7 months.