Buying a Used Car during Chapter 13

[NoMoDebtEver]

I am currently in my 15th month of Chapter 13 and have 45 months to go (50% plan). My question is what is the limit of buying a used car with cash (savings) and the Trustee won't object. ($10,000, $12,000, etc.). I currently have a car, but it is 13 years old and is starting to have transmission problems. I need a car to get to work. I know I could ask the Trustee to incur debt for a car loan, but this is defeating the purpose of trying to become debt free.

[jetsfan2010]

I was about to make a new thread about this subject as well.
Has anyone been successful getting financing while in a 13? If so what lender approved you?

[lrprn]

My question is what is the limit of buying a used car with cash (savings) and the Trustee won't object. ($10,000, $12,000, etc.).

If you use cash alone to purchase a vehicle, how would your trustee ever know you bought a car for cash, no matter how much cash you paid? What you do with cash you save yourself *after* filing should not create an issue for your trustee.

If you do have to go the lender route, then every trustee across the country has their own habits and customs around what will be allowed and how much you can borrow. Just be prepared for horrible loan terms.

It's a shame that your Ch 13 lawyer didn't encourage you to get a newer car before allowing you to file with a car that was already 11-12 years old on filing day. No wonder your ancient car is now having major and costly repair issues

[NoMoDebtEver]

If you use cash alone to purchase a vehicle, how would your trustee ever know you bought a car for cash, no matter how much cash you paid? What you do with cash you save yourself *after* filing should not create an issue for your trustee.

If you do have to go the lender route, then every trustee across the country has their own habits and customs around what will be allowed and how much you can borrow. Just be prepared for horrible loan terms.

It's a shame that your Ch 13 lawyer didn't encourage you to get a newer car before allowing you to file with a car that was already 11-12 years old on filing day. No wonder your ancient car is now having major and costly repair issues

I am concerned that the Trustee might monitor DMV records, or would expect that the cash I use to buy the used car should go to the creditors. In hindsight you are correct that I should have probably got a newer car before filing.
Thanks for the reply.

[despritfreya]

I am concerned that the Trustee might monitor DMV records. . .

Not going to happen. Trustees have too many cases to deal with. Irprn is correct in the sense that a Trustee is not going to know if you pay cash. However, I do want to warn you about a case I handled years and years ago. Received a Motion to Dismiss due to failure to make payments. Called the client and asked what was going on since if he/she had a good reason I could file a Motion for a Moratorium. Turned out that he/she purchased a vehicle for $10k cash and that was the reason he/she fell behind. Told the client he/she better get payments current as that was not a good reason for the filing of a Motion for Moratorium - $10k was a lot of $$ to put down on a vehicle and allow Plan payments to slip. Needless to say the client found a way to bring payments current.

Des.

[NoMoDebtEver]

Thanks Des. Yes I would never miss a payment, so won't have that problem.

[woeisme]

If you have 10K saved, good for you! But no trustee is going hunting for what you may have purchased if your payments are on time. I bought a used car while in my CH 13, went through a buy-here-pay-here place (high school buddy owns the place) and had to file paperwork with trustee (motion to incur debt). My trustee put a $300/month cap on payment and 17.9% interest rate cap, which is about the going rate for someone in an active BK to get financed at.

[NoMoDebtEver]

Thanks for the info woeisme.

[tammygirl1]

So, if we request to incur debt and pay outside of plan does the trustee usually rework your plan or just approve/deny based on information they already have?
Thanks!

[despritfreya]

So, if we request to incur debt and pay outside of plan does the trustee usually rework your plan or just approve/deny based on information they already have?

If you are attempting to finance the purchase you would have to produce an amended I&J that shows you can afford the Plan payment AND the new vehicle payment. Unless you are reducing Plan funding, the financing of post petition debt typically does not change your Plan payment.

Des

[tammygirl1]

Thanks Des. Have you ever seen a case where the debtor was making more so when the revised I & J were submitted for auto loan approval, the trustee also increased their plan? When we were approved our 6mo lookback was less. I am now working a small 2nd job and medical premiums actually went down....haven't done the numbers to know if this would be the case but was wondering if you have seen this.
Thanks for feedback!

[despritfreya]

Have you ever seen a case where the debtor was making more so when the revised I & J were submitted for auto loan approval, the trustee also increased their plan?

Yup. Had 2 cases. In the 1st the budget said client could increase payment by $800/month. Client decided not to rock the boat and did not move forward with an attempt to purchase a vehicle. In the 2nd, client, desperately needing a vehicle, had no problem with increasing the plan payment.

Des.