Ch 13 and car payment question

[seanp951]

My wife and I have two cars.

one is a 2006 (sedan), and a 2007 (SUV). the sedan only has about 50k miles on it, and we owe 17k on it. the SUV has almost 70k miles and we owe about 25k. both are probably worth about what we owe.. not upside down, but no equity...

car payment on sedan is $450/month. 3 years left to pay
car payment on SUV is $550/month, 4 years left to pay.

we are thinking that before we file for 13, we should try to update the SUV... while it's the newer car, it has more miles and is what we drive more... hauling kids, etc.

if we manage to trade it in... and end up with a car payment close to what we have now, or maybe slightly higher... how will that affect a 13?

can we be punished for getting a newer car if we file in the next 3-6 months?

also - what happens when my car is paid off 3 years into our 5 year plan?

I know in CA I get something lie $496/month per car. if I get a new SUV, I'll have a 5-6 year loan.. so that car payment will be at least 496, if not a bit more. my other car, however, is slightly less than that.

do I get 496 x 2, or since one car is UNDER 496, do I ONLY get the amount of that car's actual payment... or will they see that while one car is over that amount and one car is under that amount - and let me claim the full amount 496 per car...

i was wondering if i got screwed out of the difference between 496 and my actual payment of 450... or if I could somehow "apply" that to the other car.. since it's payment is higher than the allotted amount???

also.. 3 years into my plan, when the sedan is paid off.. do they do anything? will they adjust my actual car payment at the beginning of the plan be adjusted from a 3 year period and stretched to 5 years, so my actual car payment will go down? or will they leave it at 450.. and then when 3 years are up, just garnish the extra???

if I somehow get scrwed out of the difference, I almost wondered if it made sense to try and get two newer cars.. so that each one had a 5-6 year repayment period.. so I could at least maximize the amount of money I get to apply to my own cars. and minimize what I have to pay creditors.

thanks.

[lolly78]

Hi,

I believe you would get $450 for one and $496 for the other on the means test, but your budget would have the actual amounts, and they seem reasonable. If I could have I would have upgraded at least one of my cars prior to filing. Also, my car will be paid off a year before the plan ends so my plan payment will increase by $500 for the last year because I will have more disposable income available for the unsecured creditors. If I was in a 100% plan, it wouldn't go up, but my plan is 76%. If I were you I would get two new cars, its good planning on your part and helps to reduce the amount that goes to unsecured creditors for the life of the plan.

[forgotten]

Make sure you check with several attorneys on what your district will allow for a car payment on schedules I&J. For example, in our district only $350-$400 is considered acceptable. Both of my car payments were objected to.

[seanp951]

I am seriously thinking of upgrading both cars.... i like my cars.. but the reality is that if I was not in this situation.. and not going to file BK... I"d keep them, and then once paid off, which will be in ONLY 3 years.. I'd upgrade at least one.. the one we use mainly for family trips, etc.

if I am stuck with both cars for the entire 5 year plan.. and then my credit is screwed up for another year or two... that means I'll be stuck with these two cars for the next 7 years? one of my cars has about 70k on it. we average about 10-15k/year per car... if I could keep it to 10k/year.. that means the main family SUV would have 120-140k on it by the time our 5 year plan is done... then if we can't get financing.. we'd be stuck with it even longer...

here is a question - if my car payment ENDS 3 years into the plan... and then when that happens they TAKE that $500 car payment and put it toward debts... what do I do when that used car then has a transmission failure OUTSIDE of warranty and I have to spend $1500-2000 to fix it?? if I try to be 'frugal' and NOT buy a new car.. and drive my existing one while I go into chapter 13... are they going to give me a repair credit or repair expense per month? or do they just deny that and then take the car payment money.. it almost seems like you are punished by keeping your existing car.. and you are better off to get a newer car... and extend your repayment period... go further into debt basically before you file the chapter 13... so that the cars are being paid on for the life of the plan..

i'd have a car that is newer, lower mileage, and likely more reliable. i'd be less likely to get hit with repair bills....and at the end of the plan, I"d own a newer / lower mileage car that is worth more when the plan is over.

my current credit score is about 675 or something like that.. i might be able to qualify for car loans... both of my cars have about $5k in equity.. at least if you factor in what I actually owe and what current retail is. i'm sure if I go to trade them in, they will screw me and only try to pay them off and give me no money... but i maybe could just take my time, sell them privately... and then buy a car without doing a trade... i'd be able to roll whatever few grand of equity i make into the newer car..

here is a question.. say my car limits are $496/mo for each car. what if I sell my cars and each car I get is slightly more expensive. say one car cost me $550-600/month and the other is $650-700/month... now I"d be substantially OVER the $496 limit for each car...

will the trustee somehow deny me the right to keep the cars, or wil they just make me pay the "extra" out of my existing budget? maybe I"ll get one better car.. that costs over 496... and get one cheaper car that costs me right about that 496/month amount.. and then only be over a little..

I'm not going to buy new cars. I'd sell/trade my 2006/2007 cars and try to get certified used 2009-2010 cars.... something reliable/solid like a honda/acura/mazda/etc.... I just don't want to get into a situation where somehow the cars I purchase get scrutinized and the trustee can undo them, make me turn them back in.. and I would somehow get stuck w/out transportation?

my goal is not to scam anyone, or break rules..but if I can legally and justifiably replace both cars.. so that I go into the plan with better cars.. then why not do it. I don't want to wind up at the end of my plan with cars that are falling apart, and eating me up with repair bills....

FORGOTTEN - what do you mean your car payments were objected to? did they try to deny you the car payment?? I think here in CA the limit is 496/month for each car. i'm married.. so I"d get 2 cars.

if the payment goes over that level can you get in trouble? like if I bought a car that had a $600/month payment they could force me to sell it and undo the whole purchase? but if I bought a car that was not quite as expensive and the payment is $500 they will be okay with it?

i'm somewhat confused on how they evaluate the car payment.

if I go get TWO were cars within 6 months of filing - the trustee will know exactly what I did.. they aren't stupid.. will they somehow try to hose me and screw me then?

thanks.

[momofthree]

I believe, and I could be wrong, that they can make you surrender the vehicle if it is over the $496. Now, if you have a payment of $510 or something, they'd probably let it slide, but $600 would most likely be objected to and you could risk losing it. Play it safe and keep both vehicles under the IRS standard. On a 6-year term, that gets you a $31000 car at a 5% rate, that will buy you a very nice car. In fact, I will probably never in my lifetime own a vehicle that costs that much, lol.

[newbie2]

if I go get TWO were cars within 6 months of filing - the trustee will know exactly what I did.. they aren't stupid.. will they somehow try to hose me and screw me then?

thanks.

The Chapter 13 plan isn't punitive, but there are guidelines. You can purchase 2 new cars so that you are protected with good vehicles while you are in a 5 year plan, but when you try to stretch (by over $100 per car) the allowable monthly expense for them you are pushing too far. One of the benefits of being in a Chapter 13 plan is learning to live with less and budgeting. There are many good new cars that would be available to you and your wife for a car payment of $496.00. Stay within the guidelines and you won't have any issues that you need to worry about.

[forgotten]

FORGOTTEN - what do you mean your car payments were objected to? did they try to deny you the car payment?? I think here in CA the limit is 496/month for each car. i'm married.. so I"d get 2 cars.

Yes, my car payments were $493 and $426. I was told to either surrender both vehicles and obtain something cheaper or raise my CH13 payment by $300. In the end I was able to work out a loan modification with the credit union to lower the interest rate and extend the term to lower the payments which got the payment down about $250/mo. I then had to modify my plan to pay an extra $50/mo by elminating the entire entertainment budget to be confirmed.

[IamOld]

Wow forgotten - I guess some districts are very "hard core..."

[forgotten]

My District Judges opinion:
Schedule J should reflect debtor’s
reasonably necessary expenses; historical
figures are a starting point, but budget should
reflect some effort at “belt-tightening”.
Lacny, 07-50184 (10/25/07).

Trustee's position:
The trustee follows the court’s directive that
Schedules I and J control. The IRS standards have
no place on Schedules I & J.

[IamOld]

Thank you forgotten - it may help that we gave up some stupid things...like the timeshare and motorcycle...and that the cars only have 2 years each left on note...

[LadyInTheRed]

seanp951, have you schedule 2 of 3 free consultations with bankruptcy attorneys? Between this thread and another, you are trying to figure out how to plan for a Chap 13. This board can help a lot with that. But, it can also lead to information overload and unnecessary worry. You are asking good questions. You really need the guidance of an experienced BK attorney who can look at your situation, answer your questions based on his experience in your district. I'm not trying to discourage you from continuing to ask questions. But, it is never too soon to start talking to attorneys.

[seanp951]

I'm going to start meeting with some lawyers next week. I'm nervous they may mot give me the correct advice on the cars since they are not supposed to advise to take on new debt.

I'm thinking of replacing one car, not both. One car has 3 years left on the loan, other has a bit over 4. If I trade in the one with less owed, I can get a 5-6 year loan, and probably keep payments at or near the current price point they are now...just be paying throughout the whole plan.

Thanks for all the advice!

[LadyInTheRed]

Say to the attorney something like, "Before I file, I'm thinking of trading in my car for another one and financing it over 5 or 6 years. Would that cause any problems in my BK?" If it is okay to go ahead and buy a car, that gives the attorney a way to let you know that without actually recommending you go out an incur debt. If it is not okay, the attorney will flat out tell you not to do it.

[seanp951]

i've met with a few lawyers. I saw 3 of them, but liked one the best. I have been back to see him a couple other times for follow up appointments. He's very informative.

he flat out said i CAN replace one or both of my cars before I file, just keep payments at or below the 496 cutoff.

the problem is that my cars are not soooo old that they are going to self destruct over the next 5 years... both are nice. to replace my existing cars with a slightly newer versionw oudl cost me more than the 496/month. i could get close, but not quite.

to be honest.. i wouldn't be able to buy something as nice as what I have now. also, my credit is hosed...so i suspect if I actaully tried to buy a car my interst rate would be very very high.. meaning I could afford even less.... so i'd be stuck buying a car that while newer... would be far far less nice than what I have.

so i'm leaning toward just stayhing with my existing cars and riding them out th rough the enxt 5 years. one car has 70k miles the other about 60k. each are japanese. i know each car can go 200k miles.. it's just that i may have repair issues along the way, as each car will go off warranty in a couple more years.

i'll keep youposted what we do with the cars. thanks.

[mountanddo]

i've met with a few lawyers. I saw 3 of them, but liked one the best. I have been back to see him a couple other times for follow up appointments. He's very informative.

he flat out said i CAN replace one or both of my cars before I file, just keep payments at or below the 496 cutoff.

the problem is that my cars are not soooo old that they are going to self destruct over the next 5 years... both are nice. to replace my existing cars with a slightly newer versionw oudl cost me more than the 496/month. i could get close, but not quite.

to be honest.. i wouldn't be able to buy something as nice as what I have now. also, my credit is hosed...so i suspect if I actaully tried to buy a car my interst rate would be very very high.. meaning I could afford even less.... so i'd be stuck buying a car that while newer... would be far far less nice than what I have.

so i'm leaning toward just stayhing with my existing cars and riding them out th rough the enxt 5 years. one car has 70k miles the other about 60k. each are japanese. i know each car can go 200k miles.. it's just that i may have repair issues along the way, as each car will go off warranty in a couple more years.

i'll keep youposted what we do with the cars. thanks.

I know some people recommend upgrading before filing but it really doesn't sound like you need to. Besides you know what repairs might need to be made on your present cars.