Car company tells bk lawyer they have no secured lien. Now what?

[cdr777]

Hi everyone!

Just got a call from our BK lawyers legal assistant. When we filed our ch 13 in Jan '12 we listed our car loan lender as a secured creditor. 7 months later, the lender tells our lawyer that they have no secured lien on the vehicle. They are saying that for the last 2 years we've been in the process of refinancing the loan on the car and they are still waiting for us to file the new lien with he DMV. The legal assistant is saying that we will have to file a new plan and wants us to meet with the attorney ASAP.

We sent in the paperwork and have been making the payments for almost 2 years.

Anyone have anything like this happen? What does all this mean?

[SMinGA2]

It may mean that you own the car free & clear, and the debt is unsecured. Do you have enough exemptions to cover the full value of the vehicle?

Your plan payment may go up by the amount of your car payment that you no longer need to pay. But then the car loan would be recategorized as unsecured.

Each state is different on how/when the lien gets filed. In some, if its not perfected within a certain period of time - the lender is out of luck. Your trustee could see this as an opportunity to collect more $ for general unsecured creditors.

[tobee43]

It may mean that you own the car free & clear, and the debt is unsecured. Do you have enough exemptions to cover the full value of the vehicle?

Your plan payment may go up by the amount of your car payment that you no longer need to pay. But then the car loan would be recategorized as unsecured.

Each state is different on how/when the lien gets filed. In some, if its not perfected within a certain period of time - the lender is out of luck. Your trustee could see this as an opportunity to collect more $ for general unsecured creditors.

sounds like that to me as well!

[cdr777]

The only additional exemption or deduction might be the pretax $266 per paycheck that comes out of my wife's check for a childcare savings account that she signed up for (post bk filing) after our daughter was born, also post filing. All of our estimated childcare expenses were claimed in the original plan.

[despritfreya]

My guess is your attny will do the following:

1. Amend Schedule D to remove the lender as secured.
2. Amend Schedule F to add the lender as unsecured.
3. Maximize your allowed exemption ($5k for one person or $10k if married) by amending Schedule C. This assumes you do not have another vehicle that is exempt.
4. Amend your Plan to remove payment for the vehicle. This may or may not change your Plan payment. It will depend upon what you can afford to pay based upon Schedule I and J and any non-exempt value you have to provide for.

Be glad that you did not file a 7. If you had, the 7 Trustee would have stepped into the shoes of the lien holder and would have taken the vehicle regardless of any exemptions.

Des.

[cdr777]

Since I'm now trying to plan for the possibilities, does anyone have any input on whether our Dependent Care FSA can be included as a deduction or used as a reduction in overall income?

[despritfreya]

Since I'm now trying to plan for the possibilities, does anyone have any input on whether our Dependent Care FSA can be included as a deduction or used as a reduction in overall income?

I am not sure why this matters. You did not list a car payment in Schedule J, did you?

You may have to redo Means Testing to remove the vehicle ownership expense and the secured payment, which would increase your disposable income on form 22A but, neither Trustee in the Phx division cares about that form when determining what you can really afford to pay to your creditors. Both want the form filled out correctly but both look at the realities (within certain guidelines) of Schedules I and J. As to the Trustee in Tucson, my experience is that she follows the same "use of reality" as in Phoenix but she may need a bit more persuading.

As to using dependant care FSA as a deduction (I assume payroll deduction), I see no reason why you cannot show it on Schedule I. I usually just lump it in with the line item that covers insurance. Just remember, no double dipping on Schedule J under the medical expense line.

Des.

[cdr777]

My bk petition is at home so I won't know if it was listed in the schedule J till I can look at it.

In the mean time, we listed the car and loan as a secured debt. Apparently, the lender never filed any paperwork with the court confirming the secured debt. So the attorneys office contacted the lender to find out why they hadn't filed the paperwork as expected. The lender's representative told the legal assistant that they didn't file the paperwork because a lien had never been secured because they never received from us the paperwork to allow the lien to be added to the title. After not receiving the lien paperwork from us, they stopped pursuing it. So the refinance was never finalized even though we've been making the payments.

[cdr777]

Ok, just got a chance to check my bk paperwork. The schedule J lists an amount for transportation costs. Schedule D does list the lender as holding a secured claim.

Does that info help at all?

[despritfreya]

Ok, just got a chance to check my bk paperwork. The schedule J lists an amount for transportation costs. Schedule D does list the lender as holding a secured claim. Does that info help at all?

Just a normal thing. Your budget includes gas/maintenance for the vehicle which you would have no matter what. It does not include a vehicle payment as the vehicle was being paid through the Plan. Your Plan payment may remain the same with the difference going to unsecured creditors. Time to sit down with your attny to go over this.

Another point to mention to the attny. If the lender is unsecured then the payments you made on the vehicle within 90 days prior to filing are "preferential" and may be pulled back for the benefit of all creditors. Likewise for any adequate protection payments the Trustee has been sending.

Des.

[cdr777]

Ok... That doesn't seem to involved. Maybe I've been panicking for no good reason. Now I just hope we don't have to spend a ton of money to get everything corrected.

Thank you very much for all of your help. You've really helped alleviate some of my stress over this. I've always found confidence in knowledge.

Thanks gain,

[SMinGA2]

Since it looks like you're going to have more $ in your plan to unsecured, any attorney fees for this should be a non-issue for you. Your attorney will petition to include additional fees in the plan. Say its $10k extra for unsecured. It could turn into $8500 for unsecured and $1500 for your attorney. No difference for you.

[cdr777]

Our appointment is this afternoon. I'll post what our attorney wants to do.

Thanks everyone for your input!

[cdr777]

Ok... Definitely not the way I expected the appointment to go! Apparently he's gonna lower our payment $300/month! He cautioned us that the Tucson Trustee could object to it and may have to change payment. So we'll be planning for the worst and hoping for the best!

[despritfreya]

Ok...he's gonna lower our payment $300/month!

This tells me that removing the funding completely allows for such a reduction. At the same time you will need to file a new Schedule I and J showing you cannot afford the higher (original) payment. Assuming the budget works and your expenses are "reasonable" you should be fine - even when dealing with the Tucson trustee.

Des.