Another Newbie Question - Automobiles

[christeyanne]

I'm sure this will be answered when we meet with atty too, but I'm just so damn anxious in what our future holds. So we have a 2002 Chrysler Town and Country mini-van with 113,000 and a 1999 saturn with 120,000 miles. Both are working fine and our plan was to drive them until they die. I'm not thinking they are going to last 5 more years by any means, what do we do when one of these cars dies or needs a major repair? From reading previous threads, it looks like you can get approval to get a vehicle while in Ch. 13 (if trustee will approve), but what I don't understand then, does say if the car payment is $300, does your payment to the trustee based on your original plan get modified to go down $300 so you can pay for the car out of the plan, or do you just have to make it work and fit it in your budget that was already set?

I guess I'm wondering if we should go out and try and get a car now so there's a payment there when we file? To me, I think that would look bad to do now, but not certain what to do?

The forum has been great, I just read if you have a pool to make sure you acccount for pool maintenance, this would of never crossed my mind in doing the expenses - thank you - thank you for this forum.

[keepsmiling]

If you know you will be a 13, get the car NOW.

Even if you can manage to get a tt's approval for when your beater dies- seems to be very difficult to get a loan in an active 13.
And.... better the cash should go to pay for the car than to unsecured creditors.

[SMinGA2]

In a perfect world, your expenses would decrease a little because it costs less to maintain a new-ish car than it does to maintain an older, high miles car. And you'd add on a car payment, which would likely require a modification of your plan to account for that new payment in your budget.

But its not a perfect world and getting financing for a newish car can be a little tricky in a plan. If your budget allows it - then getting a more reliable car now would be wise. Going into a 13 with 2 old, high miles vehicles seems like a problem waiting to happen.

[momofthree]

Get the new car now. In fact, get 2 if you need them and your budget can support it.

[Anne2012]

I have to build on this question. We have 2 cars also that probably will not make it another 5 years. Our lawyer first told us to stop making all payments on pretty much everything (including house), then a couple of months later advised to get a new car so it will make it for the next 5 years (will finally be filing this month). At this point, we are having a tough time getting financing. We have 4 kids and cannot go buy some tiny sedan either. In any case, it's likely that at least one of these cars will not make it for another 5 years. Any suggestions out there?????

[SMinGA2]

Talk to your attorney first - but it may be safe to assume that financing at a higher APR at this point is a good idea. Likely will go down once you file ch. 13 and it will be handled in the plan. Of course, your attorney probably should have discussed this route before you stopped paying everything. Have you been saving $ since you've stopped mortgage, etc. payments? If so, and you have a decent downpayment you can probably get financing on a reasonable 2-3 year old car.

I have to build on this question. We have 2 cars also that probably will not make it another 5 years. Our lawyer first told us to stop making all payments on pretty much everything (including house), then a couple of months later advised to get a new car so it will make it for the next 5 years (will finally be filing this month). At this point, we are having a tough time getting financing. We have 4 kids and cannot go buy some tiny sedan either. In any case, it's likely that at least one of these cars will not make it for another 5 years. Any suggestions out there?????

[Anne2012]

Yes, we do have cash saved up. Atty advised us to stash so we had $$ during the bk if something came up. Thinking it will have to go to the car, which is not a bad investment under the circumstances. I'm fine to keep both cars we have now, but so very nervous about them making it 5 more years. Thanks for your advice. Here's another question: we would love to buy a used vehicle, but have also been advised to buy new since it will have the full warranty for the next 5 years.

[Pjmax]

When I bought my 3yr. old car over 7 years ago, I added an extended warranty to the purchase. Most advice that I've read says don't do this. My ext. warr. MORE than paid for itself.

[SMinGA2]

The new vs. used could boil down to personal preference and what kind of deal you can make. Sometimes you can get GOOD deals on new, sometimes a used car (2-3 years old, think lease turn in around 36000 miles) is a better investment. Many 2-3 year old, reasonable mileage vehicles still have manufacturer warranties. There are several makes that now offer longer standard warranties.

[christeyanne]

Thanks for the input. If we do buy another car, we don't really have anything to put down and would give the Saturn to my 17 year old stepson since it's really not worth anything. Is there a dollar limit on the loan amount you can have? I just don't know if we should get used or brand new. My instincts would say buy a $10k used car, but if we can buy new and not have any worries (I know we will have lots of worres, I mean car worries) the next 5 years, that would be great. I thought I had read somewhere in all my reading you couldn't have a payment over $300 or $400 and be in Ch. 13, is that right?

[SMinGA2]

The payment amount probably won't ultimately be an issue - if your ch. 13 plan will pay off the loan thru your plan payments. Though you'd need to make sure you could afford your plan. Some things to discuss with your attorney: what amounts MUST be paid in full and what minimum payment are you looking at as a result?

Such as if you have $15k in mortgage arrears, $12k in car loan, $3k in attorney fees then your plan must pay off this $30k, plus some interest to the car lender and the trustee gets a cut of all you pay in. So that example might work out to a minimum plan of about $600 x 60 months. For a different scenario, say you had the same attorney fee & mortgage arrears but bought a $30k car. Now your plan payment would need to be something like $900 to make it work. If you can weigh what your plan must pay vs. what DMI you will have, then you will be in decent shape.

More on the new vs. used: I think these days it really depends on your local car market. We've been doing some car-window-shopping of sorts. Looks like Fords, Chevy's you can get a ~3 year old model for about 75-80% of the cost of a new one. Toyota is different though. The Toyota dealerships are running great deals on Corollas and Camrys, and you'd pay more or the same for a 3 year old model. Guess it depends on the make's reliabilility history?

[christeyanne]

"Such as if you have $15k in mortgage arrears, $12k in car loan, $3k in attorney fees then your plan must pay off this $30k, plus some interest to the car lender and the trustee gets a cut of all you pay in. So that example might work out to a minimum plan of about $600 x 60 months. For a different scenario, say you had the same attorney fee & mortgage arrears but bought a $30k car. Now your plan payment would need to be something like $900 to make it work. If you can weigh what your plan must pay vs. what DMI you will have, then you will be in decent shape."

We are not in arrears on anything so far. Current on mortgage and all credit payments. We have $140,000 in unsecured credit and personal loans. Just can't keep up on min. payments. Does it work so that the attorneys fee, say $3,000 and the car loan, say if we get one for $15,000 must be paid, then whatever disposable income is left after we go through our budget will go to the credit cards? Is that right? It just seems crazy to me to be going out and buying a vehicle on the eve of filing Ch. 13, but I don't want to leave myself open to a disaster later either. Thanks for the tips about the chevy and ford. Good to know.

[SMinGA2]

Pretty much, assuming your car loan is paid within the plan, and a % goes to the trustee as well. Varies between 5-10% depending on your district. Say your district is 7.5%, and your plan payment is $1000/mo then $75 each month goes to the trustee. The attorney would probably petition to get paid pretty early in the plan, and if there were additional work for your attorney down the road he/she would petition to have the new charges paid in the plan as well. (Such as if you need to modify your plan in a couple of years.)

In theory there should not be a % minimum required to unsecured, but the trustee's job is to try and get as much as reasonably possible. Its also the trustee's goal for the plan to be successful. No one is suggesting you go buy an $80k car to make sure your unsecured get zip. But if you don't think your current vehicles will last 5 years, then taking care of transportation now can help you make a successful plan.

[SMinGA2]

Ps-if you're current on everything now, you may be able to strategically make things work to your benefit. Such as using the August house payment + credit payments to put $ down on a vehicle. Nothing would hit your credit report until they pass the 30 day late mark.

[christeyanne]

Ps-if you're current on everything now, you may be able to strategically make things work to your benefit. Such as using the August house payment + credit payments to put $ down on a vehicle. Nothing would hit your credit report until they pass the 30 day late mark.

I didn't think of the 30 day window, thanks. That would give us about $6,000 dollars - thanks for the tip. That should pay for attorney too I would hope.