Car Question?

[Macdad123]

Hello Everyone,

I decided to put this in a new thread as my first thread was getting long and wordy and this was more of a specific question.

I have a car that is approaching 4 years old. It has high mileage and is due for some pretty expensive maintenance. (new tires, transmission service, etc.) close to $2000 dollars worth. I was considering trading it in as opposed to doing the work on it. If I do this I will actually save about $100.00 per month on my payment. I am currently paying 588 per month. The car is a VW. The payment would be within the allowance for sure.

My question is, as I have been reading (ALOT) on this board, I came across a post where someone in Florida was forced to give up a car that they had for 8 months prior to filing because of what he called the 2.5 year rule? He said he did not own the car for 2.5 years so the trustee made him give it back? Is that possible?? Could it have been that he did not have enough money to fund a 13 and keep the secured car payment so he had to turn it in to allow some money to fund the 13?

Thanks for you replies

[dmc-2008]

No. I don't think so. But others will know for sure. However, I read on here that people purposely get new cars right before going into bk so I would think it's probably wise. My car is 10 years old, 87k and I prob should have done that, I have 2.5 years left. So.... I would say get a new car so that is not a worry while you are in it. Good luck.

[jmac]

Problem is when the car is paid off trustee may come knocking for the payment you no longer have...New 5 year loan you don't have to worry about that or maintenance. I bought a car 2 months before filing and in someone else's name( which i heard wont fly) but it did.

[keepsmiling]

Buying a new car is probably your best bet. It is very often the best solution as you won't be able to do much of anything once your 13 is rolling. It's called pre planning.
I think that other thing has to do with cramming down value.
Someone smarter than I will confirm.

[Macdad123]

Thank you for the info so far. I think that getting a new vehicle would be smart, I have had a lot of issues with this one and I am afraid of what could happen to it in the next 5+ years. I just didn't want to get something then the trustee make me give it up. I will be paying (by my figures) around 2900 into the plan. I cant see how they would object to me having a car payment when its allowed by the standard allowances.

[dmc-2008]

[Macdad123]

2900 a month! Yowser! But its all relative ������������

I know...I feel like having my wife just quite her job, but she is 28 years in...2 years from entering our DROP program which will allow her to cash out with a pretty decent payout 5 years after that. Seems like a lot to give up. But it is tempting!!

[justbroke]

My question is, as I have been reading (ALOT) on this board, I came across a post where someone in Florida was forced to give up a car that they had for 8 months prior to filing because of what he called the 2.5 year rule? He said he did not own the car for 2.5 years so the trustee made him give it back? Is that possible?? Could it have been that he did not have enough money to fund a 13 and keep the secured car payment so he had to turn it in to allow some money to fund the 13?

There is no 2.5 year rule and certainly not in a Chapter 13. They may have been mixing up what they call the 910-day rule. The 910-day rule had specifically to do with whether you could "cram down" the value of a motor vehicle in a Chapter 13 when the vehicle was "purchased" within 910 days of filing. A Chapter 13 allows a debtor to pay the creditor the "actual" value of the vehicle over the life of the Chapter 13. This is known as the cram down and is found in 11 USC 1325. Many people refer to it as the "hanging" paragraph but it's most commonly referred to as the 910-day rule and vehicles are referred to as "910 vehicles".

There are only two reasons a person would give up a car in a Chapter 13. First, would be it's too expensive (more than the IRS allowance) and the person could not afford it otherwise in their plan (because they could not cram it down). Or second, they could not present a feasible plan because they would need to pay the difference between the allowance the the actual monthly payment as an addmtional amount to the DMI.

For example, you calculate your DMI as $100 month but you have a new "910" vehicle. The monthly payment on the 910-vehicle is $899. The Trustee balks and says that you must pay the difference into the plan (that's the national allowance of $517 a month). That's $382 extra a month. If you can't afford or refuse to pay the difference of $382/month into the plan, then keeping the "910" vehicle is not in the best interest of the creditors! In that case, you'd need to give up the vehicle. If $100/month is your DMI and you can squeeze out anotehr $382/month, you'll probably be in a POORLY confirmed Chapter 13 Plan (because $382/month is a LOT of money for a Chapter 13 debtor). That $382 represents over $22,000 over the life of a 60-month plan. Nothing to sneeze at.

[Macdad123]

Justbroke....thanks for the insightful response! I have read a lot of your responses in the last couple of weeks and they are always very informative!!

[spidge]

Wish I would have bought a new or newer car in the beginning of our 13 but then again we are under median and not paying nearly as much into the plan. It just did not make sense for me. I would just pay the $2K and be done for a spell, but I don't know the entire case situation.