What would you do?

[roger_221]

I qualify for a chapter 7 but I won't be filing for about 3 months due to CC cash advances.

One of the major expenses I have is my truck which is $360 a month. I need some advice on what to do with it.

My lease ends in March of '08. At that time, I can turn in the truck to the dealer. Or, I could refinance the truck to purchase it. Or, I could sell it. I took it to Carmax the other day and they gave me a price that they would but it for. If they did this, it was still $1,000 less than my payoff amount so, I could pay $1,000 and save the 360/month from now through March.

My Dad passed away last Saturday. I believe I could purchase my Dad's car from my Mom. It is an older car but would be cheaper for me in the long run. The payments would be less, thereby saving me money every month - and I would own it. The car is probably worth about $3,000 dollars. So, I could pay it off in a year with no interest from her at $250 a month. This difference in the $250 vs the $350 should not affect the means test because I am so far in the negative anyway.

However, I didn't want to do anything wrong since she is a family member and I didn't know what the Trustee would think of this.

If this would be OK, then what do I do with the truck? Should I just stop making payments?
I could let them come and get it.
I could turn it in.
Will they sue me if I stop making payments?
What if they come and get it and say that the market value of the truck is not worth the residual value - will they sue me for the difference? Also, I have a $375 security deposit with Toyaota Financial.

What would you recommend?

[SinkingFast]

Mom's an Insider.

Family, friends, and close business associates are considered Insiders by the Court. Any dealings you have with them within 1 year of filing BK will be very closely scrutinized.

If you sell the Truck so close to filing, the Trustee is gonna want to know why. And you'll most likely have to explain how you came up with a $1K difference out of pocket.

The Trustee will also probably go back to Mom to recoup any payments you make to her. ANY money paid to Insiders within 1 year of filing is up for grabs with the Court.

You're best off to sit tight with the truck until after you file.

[keepmine]

Or, let the lease go and borrow the car from your mother until the bk is done. Then, arrange to buy it from her.

[JRScott]

I agree don't buy it from your mom at this time, you need to wait til after discharge to do that I think. However if she's willing to let you borrow it in the mean time that could help you out. (She's an insider as Sinking pointed out and the courts look closely at that).

Can you turn the truck in sooner? Is there any penalty to do so?

[familyof7]

even if there is a penalty to turn it in sooner it can be discharged in the bk so yeah "borrow" the car until discharge and let the lease go back if anyone ask any questions say I could not afford the lease pmts anymore and my mom allowed me to borrow her car until I can afford a new one and put it in your name After discarge and closing

[ProSefromCA]

roger_221,

I'm sorry to hear about your dad.

If you've decided to definitely file then my advice is to look at the bankruptcy from a point of making business decisions. Since you leased the vehicle you have no real ownership attachment to it. It sounds like you don't mind letting it go. First, and someone can correct me if I'm wrong, I think the actual date you file is what matters most for what you are asking, not discharge. For example, the day AFTER you file you can begin making payments to your mom. That's totally separate from your bankruptcy estate which is created the day you file.

For the truck, you have no ownership, so it looks like you just want to get out of the lease about 8 months early. One thing I might recommend for you to get out gracefully is swapalease.com. I haven't used it, but hear it's a convenient way to escape a lease without penalties. That way you stay in the dealership's good book. If your mom would let you BORROW the car until you can start payments AFTER you file, then you just need to decide what to do about the truck. If you just stopped making the lease payments they would reposess the truck, and say that you owe X amount of dollars for defaulting on the lease - but that would be cleared once you filed your BK. You could probably kiss the security deposit goodbye, in that case. I would look into swapalease.com in your case though.

[CindyLou]

You may also want to take into consideration the fact that you may owe on your lease for wear, tear, and miles. My vote: give up the car voluntarliy AFTER you file bk. But don't make any more payments. If you turn in after you file then it shows "included in BK". If you surrender prior to filing then your credit report shows "repossession". The day you file, call them up and give them your BK filing # and tell them you aren't sure what you will do with the vehicle. Give them a few days to update their system and then call them and ask them to pick up the car or turn it in to them. Its important that they transfer your account to their internal BK dept BEFORE its given back. This makes all the difference on your credit report. And as far as buying the car from your mother; as long as you show that you have a promissary note and she files a legal and active lein on the car for the amount of the loan you will be fine making the payments to her now and after the BK. It will be a secured loan on a vehicle that you did not previously own. It wil not be considered prefferential payments because it is a secured loan. Even though she is an "insider" she is loaning you money, not the other way around. There should be no issues whatsoever in the scenario as long as the paperwork is stellar!