Traded in old Jeep for new, filing Chapter 13

[ld2366eh]

We traded in our 2005 Jeep Grand Cherokee (monthly pmt $453) in for a 2012 Jeep Grand Cherokee (monthly pmt over $700). We are saving money on gas and future maintenance. We want to file C13 in a few months and now I'm worried that our new Jeep will be considered a luxury vehicle. There's no equity in it, but with the high pmt, will the trustee make us surrender the vehicle to divert the $ to creditors instead? We don't want to lose the Jeep, and my husband won't drive his 06 Mustang through the winter. Has anyone ever had to give up their vehicle because of this type of scenerio? We also have a T&C mini-van that I drive (the Jeep is my husband's).

[SMinGA2]

As I understand it - worst case scenario is the amount over the allowed vehicle payment ($496 or so I think?) would not be allowed. Meaning it would count at $496 in your budget - even though you're paying $700. So that $200+ you'd need to 'find' in your spending. Such as you may be able to claim $1200 on food + clothing + fuel + misc, and if you could manage to keep it under $950 - that would allow you to pay the extra on the car.

Big gaps like that could kill a plan though. Its one thing to shave off $20-30/mo on expenses - but to have to shave off more than $200 may be tough some months.

[justbroke]

SMinGA is correct in that finding $200 in the plan elsewhere is going to be difficult! Trust me, a Chapter 13 Plan is not about what you want to pay, but about what you have in allowed expenses. You will probably get grief on that $700 payment. Especially with a second car, you are going to be $200/month in the hole. As stated, you could take the money out of food and clothing expenses, but that's a real tough thing to do. I speak from experience where I actually had a shortfall per month (due to the "silly" Means Test calculation).

I see additional problems since you appear to have at least 3 vehicles. If you really are having troubles and struggling, a $700/month car payment isn't going to help you. What do you pay on the other two cars (Mustang and Town&Country Minivan)?

I would not want to start a Chapter 13 plan where I already have issues.

[ld2366eh]

The Mustang will be paid off in October (our current plan is to file in August) and the T&C will be paid off in April of next year. I guess we'll just have to wait and see what happens. I don't have my intake meeting until June. We can't surrender the Jeep unless we have another car to replace it (winter car I mean). The Mustang can't (perhaps I should say "won't"-my husband's words, not mine) be driven in the winter. The lawyer I met with in my initial consultation seemed to think the cars should be fine and we would factor in a "step up" in plan payment when the T&C is paid off and ignore the Mustang payment for schedule J and the means test since it will be paid off this year.

We are struggling in that our credit card debt and other unsecured debt (priority IRS debt & med bills), arrearages in mortgage etc. has sent us into a negative cash flow position, but with a Chapter 13, we can strip our 2nd and 3rd lien, etc. I think we should be able to afford the secured debt we'd like to keep, depending on the plan payment. Right now, I'm saying that we don't want to give up the Jeep. I probably will change my tune later if/when the Trustee objects and we can't find an affordable solution.

[justbroke]

Okay, so at least you have a strategy. I didn't realize that the older vehicles were almost paid off. A step-up plan is exactly what you do when the vehicles come off lease. A Chapter 13 Plan with cars that will soon be un-encumbered is a work of art! Hopefully the attorneys can see what the best course of action is with the cars. They are a great source of "extra" padding in the Plan if you can do it right!

[ld2366eh]

I hope you are right! I'm an accountant by trade (please don't ask me how we got into this mess) and I am trying to be as involved in this as I can be, by getting educated and knowing where every penny goes from this point forward. Thanks for all of your advice!