High car payment, could it be a problem for my Trustee and Ch. 13 judge?

[NeedOptions]

My wife and I bought an Acura MDX in May of 2010 as we wanted to trade in our 5 year old car for a newer one in anticipation of Ch. 13. Our payments are huge ($800/month) and that's with a 2.9% interest rate. We are about to file for CH. 13 next week as we just submitted all our expenses today to the lawyer. My lawyer stated that there is a new Ch. 13 judge in town and he is very picky about certain things. He said it may be possible that the judge tells us to surrender the car and buy a cheaper one. We currently have a Honda ($480/month) and the Acura ($800/month). Any ideas what we should do? Both our credit is now shot as we havent made a payment on our credit cards for the past 5 months. We would be in huge trouble if the judge decides to take our car away from us as it would be near impossible to buy another car with our credit and the new bankruptcy on our records. Thanks for listening.

[walkthaplank]

That $800 car payment is going to be a problem, especially having purchased it so close to your filing. Expect an objection from the trustee. If you were close to the allowable amount that is one thing, but you aren't even in the same neighborhood.

[NeedOptions]

Unfortunately, I agree with you. The timing is just bad luck. Our lawyer stated that the older judge (who retired 3 months ago) would not have had a problem with it. The new judge just might. Thus, this brings me to my next point. Should I try to buy a reasonable car (under $500 payments) now and surrender the Acura if our Trustee or Judge tells us to? If he/she doesnt say anything about the Acura, I can keep the Acura and give up the new car that I will try to purchase before the BK goes on my credit. Or, should I just gamble and pray that the trustee/judge lets me keep the Acura?

[987654]

Well what is your expected % payment to the unsecureds? I can imagine it would be more of an issue to the trustee if you are paying close to or even with 0% while spending that much on cars, while if you're nearer to 100% there would be little reason to object since they are getting paid regardless.

[NeedOptions]

I don't know the numbers yet as I just submitted all my expenses today. Hopefully, I should know them in a few days.

[forgotten]

Both of my car payments were denied at $530 and $460 as being too expensive, that was with paying $1000/mo to unsecureds in the plan.

[NeedOptions]

Uh oh, sounds like I am in trouble Any advice on my next step? I'm pretty sure no one would lend to us considering our credit. Would it be possible for a family member to buy us a reasonable car and still get some type of allowance for it during our ch 13? Our names would not be on the financing at all.

[MOMof3]

We were forced to surrender our Ford F-350 w pmt/$685. My Van w pmt/$400 was included in the plan and has been paid off. We also had to surrender our travel trailer, which was practically new with a payment of $285/mo. We ended up buying a vehicle for cash after filing, an old nissan pathfinder we picked up from a friend for $1K (they let us make payments, that is how poor we were after filing!). We "upgraded" to a 2002 Ford Expedition in 2009--after approval to obtain new debt by the court. The financing available was outrageous & required a newer vehicle than we could afford, so my in-law's financed the Expedition for us with a line of credit they had. Thank goodness. It is now paid off! We were used to having really nice vehicles (that we really couldn't afford), so it was quite a hard time having a really junky car for 2 years as our second vehicle. The expedition, while still an older vehicle, is really nice and fits the whole family (we have 4 kids now).

[NeedOptions]

Were you given any allowances on the Expedition financed by your in laws? In other words, were you able to take the $489/month car allowance, thus lowering your payback to your creditors? Thank you.

[MOMof3]

No, we didn't modify our plan. Just got the order to incur new debt. The money we paid per month to my in-laws had to just get squeezed out of our (already tight) budget. We had a little of our own cash to use when we bought it, my parents gave us a gift of a little more, we sold the pathfinder, & my in-laws gave us the rest. Thankfully they "forgave" some of the debt/interest as a Christmas gift. The rest we paid to them at $350/month for 12 months. It was REALLY tough at first, but I got a raise right after we bought it that covered a bit of the payment & my kids stopped doing swim-team (their choice) and that helped as well. Technically, you should be able to modify, but our plan is really workable & so tight with secured/priority debt, that we really don't want to rock the boat!! Good Luck!

[NeedOptions]

If you are in an active bankruptcy, do you need to ask permission to buy a car even though it is not in your name? I assume we do. If that's the case, it only makes sense that we would be able to use the car allowance if we buy another car under another persons name. Momof3, thanks again for your help.

[debtinohio]

Unless you're at 100% payback you will have trouble. Mine were $599 and $600 and were allowed only because the $599 was only for another year (lease) and then I was allowed an allowance of $460 to replace it so my new total is $1060 for 2 cars.

I was berated for about 20 mins at my confirmation hearing about the 'luxury cars' but ultimately no objection was filed. $800 is outrageous to be honest and I would expect trouble.

Hopefully that's $800 for only 5 years because if it's a 72 month loan that will raise your payment in the plan since it now needs to be paid back in 5 years. That happened to me, my payment was $550 and went to $600 and the trustee saw it as a $600 payment.

[AlmostAmos]

I had a CH7 case so it is not apples-to-apples, but... MY attorney said "you never want to show up to court w/ a nicer vehicle than the judge/trustee". Unfortunately, high car payments = perceived luxury. I, personally, don't think $5-700 is expensive for a car considering today's costs.

[NeedOptions]

Thanks guys and gals. It sounds like I will have to give up the car. I just checked my Fico score and it is now a paltry 540. I don't know why I am surprised as I haven't been paying my cc's for the past 4-5 months. I supposed the truth just set in and now I have bad credit. If I am under the assumption that the car will be taken away, how should I proceed to buy another car? No one in their right mind will finance me now with my score. I really need to buy another car asap. Would it be ok to buy one now since I am filing for ch. 13 next week? Should I get one now or after I file? My lawyer could not really comment on it as he is not allowed to tell me to get in more debt. Would I have a problem if I were to finance one (by God's grace) before I file?

[MOMof3]

If you can get financing, do it now. Don't tell the dealership you are surrendering your vehicle after you file & don't trade it in and lose money by financing that negative equity into your new vehicle. Find something w/payment you can live with and that is reasonable. If it comes up in court, you are doing the RIGHT thing by downsizing. The car will most likely have to be paid within the plan, but it's worth it. Get something that will be paid in full by the time you are done!

Good Luck!!