Made the necessary leap!

[PhantomPain]

First post so bear with my rambling. I figured I would just unload now. I'm pretty much calm about this whole situation we got ourselves into but am just unsure a little to get it gets a little further along. I am particular curious about the last part of my post and buying a car prior to filing. Here it goes:

We had our 2nd consult with a different BK attorney 2 days ago and we have decided to go with her. The 1st attorney we met with had a bad attitude, wouldn't look at you and just overall seemed angry about life. The new attorney is with a respected local firm that gets high high reviews from former clients and in particular the attorney we me with. I can't wait to talk to her again Monday as I have some nagging questions.

Our financial situation is a mess for various reasons - moving across country, cut in salary, loss of spouse's income due to major surgery, raising 4 kids, helping family, yada…yada…yada.

We are doing a Chapter 13 as we have nearly 100K in income (doesn't seem like it), 87K in unsecured CC debt, 66K in Student Loans, 33K Car Loan, 186K in mortgage loans. We have nothing in savings. Secured credit amounts to $1975 a month and unsecured(including student loans) amounts to $2600 a month. kRaZy!!

So….our attorney says we should wait until the end of March as some of our income has declined this past month and going forward will decline a bit more. The thought was also to have 90 days of no CC use.

We went in very prepared as I had every penny spent for the entire year categorized and accounted for. The attorney stated that nothing was really out of line and unreasonable. The house and the financed car are with just a little less then we owe on them. We have a paid off car that is 9 yrs old that I plan to pass onto my 15yr old son next year.

This is the nagging problem…the 9yr old car. Our attorney "suggested" that we get a car NOW with maybe a $300 a month payment that will last us through the 60 month bankruptcy and more until our credit is repaired. Make a whole lot of sense but it is mind-boggling to me to do this when I have been living paycheck to paycheck. The attorney says that we are paying $2600 a month now on the unsecured so the $300 and combined with the estimated $400 payback will still be not much a burden. I am still scratching my head - is this possible? Is it right?

Any thoughts?

[chicagoannie]

Hi Phantom, welcome to the forum - people here a great and very helpful! I had a quick question after I read your post...I did a Ch 7 so am not super familiar with Ch 13...but your estimated payback will be $400? That was not a typo? I would have thought the amount each month would be higher (but again, I am not a Ch 13 person) so I am just curious.

I'm sure someone will chime in with their thoughts on the new car.

[enginegirl]

Hi Phantom.... Firstly welcome to the forum.... there is a ton of valuable info on here!
For the car.. get it now before you file... also it is a good idea to get an extended warranty on it so you will be covered for the plan....
stop paying your Credit Cards and save the money to pay for your lawyer and also for a downpayment for the car!!

and Chicago Annie... $400.00 could be correct... my payment is only $523.00 over 60 months.

[MommyMc]

Hi! Welcome the Chapter 13 community!

When we filed we had only one car because my husband travels so much. We were himming and hawing about getting a second car but we just hadn't done it. Our lawyer told us to let our current older car go into repo.. we were very upside down in it, and to get 2 newer cars. The concept was very hard for me to wrap my mind around! It seemed like we were cheating or something, but our lawyer get telling us we were in the right to do so. So we did! We also got the extended warranties on them and the roadside service agreement. They will both be paid off just as our BK ends.
As far as a $400 payment goes, I'm sure that is possible. Our numbers are pretty similar to yours and we are paying $350 a month, it is scheduled to go up here in May because that is when my 13 year old sons braces payment is scheduled to end. We are 2 years done, starting our 3rd year this month!
Good luck to you!
Happy New Year!

[LadyInTheRed]

PhantomPain, I think the reason buying the car doesn't make sense to you is that you are looking at it from your current financial situation, while still paying CCs. I bought a car before filing. Since I stopped paying the cc's, my $300 car payment made sense to replace an 11 year old car before filing BK. I traded about $900 in cc and 2nd mortgage payments for a $500 trustee payment, including the car payment. If I hadn't bought the car, may payment would still be $500, but $300 of that each month would go to unsecured creditors instead of the car payment. Look at your budget without the credit card payments and it will probably make sense to you too.

[PhantomPain]

chicagoannie - Not a typo. That is $400 per month over 60 months. I have no equity in my home, my old car isn't worth much, I have my expenses all documented and the attorney stated that they weren't out of line. Blows my mine.

[PhantomPain]

MommyMc & LadyInRed

Thank you two for chiming in. I was going crazy thinking about this. I emailed my attorney this morning not expecting an answer since it is a holiday but she did reply and stated she'd call me Monday. She basically states she can't say to me to incur anymore debt for a car but she is hinting/suggesting it will be okay to do so. Just seems unethical, risky and down right scary. On the other hand, it makes a ton of sense to me. I'm not a car kinda guy. I don't need anything big, fancy, flashy or fast. I just something that starts every morning for years on end.

[PhantomPain]

Another thing - since I made my last CC payments in November for all but 2 for which I made in December, is it likely I'll get served/sued before the April 1st? Discover for which I have not used since June 2010 started calling both my cell and my wife's cell phone several times a day within 6 days of missing the December's payment. I have it blocked now as there sounded liked some drugged out unintelligible person on the other end. They just ask my name right off the bat which I wouldn't give and I would counter and ask who they are and they wouldn't tell me. Is this what I should expect?

[enginegirl]

She basically states she can't say to me to incur anymore debt for a car but she is hinting/suggesting it will be okay to do so. Just seems unethical, risky and down right scary. On the other hand, it makes a ton of sense to me. I'm not a car kinda guy. I don't need anything big, fancy, flashy or fast. I just something that starts every morning for years on end.

it is not unethical if you make payments.. Just get something reliable and with an extended warranty.... the absolute last thing you will need while in a 60 month plan is to have your car break down.... I purchased a 2010 Mazda and filed 10 days later.. the trustee had no problem with it at all.

also regarding the phone calls.. yup sound like the standard MO... they called my office, my family members, my dad's ex wife... it was not pleasant..... ask them politely to only contact you in writing not to call you at this number and then hang up.. the calls all stopped within days of my filing...

[PhantomPain]

I hear ya - but won't the trustee balk that I have a semi new 2009 Honda CRV, 2002 car and then I going to buy a 2011 (probably a Civic) before I file?

Also, did you have any problem obtaining financing since you most likely stopped paying credit cards before buying your 2010 mazda? I intend to put down nearly 2K which would have been credit card payments so I got to bet that helps.

[enginegirl]

I had stopped paying my credit cards about 10 months prior and I was served by capital one.... I did get turned down by my credit union... but was able to get financing through Mazda although I am paying a higher interest rate (7%). I also put $5000.00 down.
quick question.. why would you keep the 2002? can you trade in towards the new car? that way the Trustee wont have an issue with you being a 3 car family.

[PhantomPain]

Well - I was planing on keeping it for my boy who will turn 16 the spring of 2012. Kelley Blue book on it is $3300. I have no assets of value other then that car and our household goods which don't amount to much.

If I traded it, I'd be lucky to get $1200 for it. It's in good shape and runs like a top and even though it has 125K on it, it would probably last me another 5 yrs easily. I probably average 20-25 miles a day on it.

[tyson24]

Phantom, I have to tell you that usually, when it rains it pours. I filed Chapter 7 in October, and since then my water heater has gone out, a transmission on our 2005 truck and the motor in my Toyota last week. I could never have planned for this or even thought these things would happen. We were not only neglecting our bills and up to our eyeballs in debt and despair, but we neglected necessary maintenance on alot of other things that are now breaking.

If you can swing buying the car, do it. I wish I would have. Good luck!

[enginegirl]

Well - I was planing on keeping it for my boy who will turn 16 the spring of 2012. Kelley Blue book on it is $3300. I have no assets of value other then that car and our household goods which don't amount to much.

If I traded it, I'd be lucky to get $1200 for it. It's in good shape and runs like a top and even though it has 125K on it, it would probably last me another 5 yrs easily. I probably average 20-25 miles a day on it.

you probably wouldn't be able to keep 3 vehicles especially since your son will not require car for another year or so... ... the reality is that a car with 125K miles will not last you through the whole 60 months without requiring some type of major repair... your budget will simply not allow for a $500-$1000 repair..

[PhantomPain]

I dunno - attorney seemed pretty sure I could keep it, I'll question it Monday and post my results here. Besides, I couldn't sell it or would very unlikely be able to trade it in. The check engine light came on the week after it passed inspection during the Thanksgiving week. This is what sent me over the edge onto the BK path even though the car runs fine (for now).

I was told by 2 local shops that the part is $1200 or so plus labor which totals to about half the cars value practically. In a bit of luck since I am the original owner, I called a dealership for the manufacturer of the car in question to see if it is covered under a recall for some reason, as it were there was a 5 yr old recall I was never made aware of. Closest dealer is 60 miles away.

So I either get it fixed or say to the trustee it is worth 1/2 of what I stated. Additionally, wouldn't it be covered under an exemption of some sort?