Cars, BK and IRS

[amino99]

I currently owe the IRS $50,000 and they expect to be paid $900 per month. This is what I have in unsecured debt payments thus the reason for the impending filing for Chapter 7. We rent thus we have no real property nor do we have any assets.

We have two vehicles...a 2004 car which is free and clear, and worth approximately $10,000. Then we have a 2005 pickup which we owe $8000 on it and is worth approximately $17,000. The pickup is covered under a cross collateral contract thus we're going to lose it if we don't do something. We can't reaffirm it as we also have two cards with the CU for $24,000.

What should we do?
Should we sell the car and use the proceeds to pay off the pickup so we have clear title?
Should we trade the pickup in for a new one so that we don't have quite so much equity?
Should we attempt to refinance the pickup with a bank or other lending institution?
Should we just give it back during the bankruptcy and plan on purchasing something after discharge?

[FilingOnMyOwn]

Do you need two cars, or only one?

[SinkingFast]

What State would you be filing BK in? That will help us take a look at your Vehicle and WildCard Exemptions available to cover equity. Will you be filing solo or joint?

As it stands right now, based on your numbers, you have approx $19K in equity in vehicles you'd need to cover when you file BK. Unless you live in a State where you're allowed to use any unused Homestead Exemption as a WildCard, you may be SOL on covering your vehicles. And both of them could look very appealing to the Trustee.

Say the Trustee seizes both vehicles to sell,......... The Trustee would pay off the existing loan on the one vehicle, pay you your Exemption(s) you apply in your BK filing, pay the costs to sell the vehicles, take their cut of the pie, and pay the rest to the IRS. The IRS would get the proceeds, if there are no other Secured Creditors, because the IRS is a Priority Creditor.

How far out are you from filing?? Are we talking months to a year?? Or do you plan on filing within the next month or so??

[amino99]

Yes, we need two cars as my wife needs it to get to work.

We live in Alaska and plan on filing in the next month or two. We don't have a choice as Uncle Sam has made it clear he is getting his money before any one else.

[emoney]

It is possible to discharge IRS debt in Chapt 7 BK if the IRS levy is over about 30 months. Most CPA and attorneys do not know of this rule and of course the IRS will not tell you about it.
Check with your hired guns for the exact information. I was able to dischare about $50,000 in liens with Chapt. 7 BK.
Thanks,
emoney

[amino99]

No, the IRS debt is a 2005 tax year debt thus won't be dischargable, and the IRS isn't patient when it comes to their debts. They keep an eye on the 3 year rule too, and expect their payments until you get there. The IRS payment is the one that puts us over the top of being able to pay our debts. We have been treading water thus far but the IRS debt was the 6000 pound anchor we caught that sank us....

[tradewiz50]

How do you owe the IRS $50K?

[SinkingFast]

If your vehicle values are fairly accurate, then you're gonna have significant equity you cannot cover with an Exemption.

http://www.bankruptcyforum.com/showthread.php?t=236

and one motor vehicle to the extent of a value not exceeding $3,600 if the full value of the motor vehicle does not exceed $24,000. (Section 09.38.020.)

That's per debtor, so if your spouse fills with you, you can double that.

Do you have a particular reason to rush to file?? Are you being sued or have some other legal action pending against you??

If you take more time to file, you can consider some alternate avenues. Like selling both of your vehicles, buy old beaters for cash that are right at or less than the value of the Exemption. Use some of the money to pay your attny's and filing fees. Take care of any necessities you may need. Possibly even send some extra monies to the IRS toward your tax debt.

You're posting in the Ch 7 Section, but are you sure you qualify for Ch 7??

You can check on the Median Income and Means Testing info here:

http://www.usdoj.gov/ust/eo/bapcpa/2...anstesting.htm

[CindyLou]

I would suggest seeing an attorney that specializes in IRS settlements. You sound like a perfect case for them. They do wonders!!!! I think you will probably need to do some pre-planning and make sure you don't have so much equity in your vehicles no matter what you decide. Good luck