Bought a new car - will they take it if i file chp 7?

[jcmt1013]

i bought a new car a few months ago, i put in $4000 in a trade from my old car and $2000 down. will they see that as $6000 worth of equity and take the car from me if i end up filing chapter 7?

thanks for any help in advance...

[marzipan13]

car value when you file...

I'm not a BK expert, but...
Was the total price of the car $6000? Or did you finance the rest?
I'm guessing that it would depend on the value of the car when you file,
not what you paid for it a few months ago.

When do you plan to file?
Try checking Kelly Blue Book website or NADA Official Used Car Guide
to determine the value. kbb.com nada.com
Your car is probably worth less since you've bought it a few months ago.
If you plan on filing in the future, the value may go down more.

For example, the new car was worth $20k when you bought it.
You put down $6k, with $14k financed (with interested added into the balance)
But now that you've used it, the value may go down
a lot., so it may only be worth $19k, $18k, $17k, etc or less.
And your equity may be a lot less than $6k.

[jcmt1013]

it is an 07 prius, my payment is $300 a month. kbb on it now is about $20,000 now... they hold their value. so i have almost $7000 in it with the trade in and the down payment, and the few payments so far. (my truck was broken down but got $4000 on a trade in so i went for it, they didn't know there was anything wrong with it after test driving it.)

i won't be filing for 6 months or more (depending on if my short sale goes through or not), but the car will still be worth about the same i am guessing.

any more thoughts anyone? thanks so much.

[marzipan13]

financed amount...

How much do you have financed?
Subtract the market value from the balance and that will be what your equity is in the car.

Take in consideration... in 6 months the value will go down
and the balance will go down.
The value may also go down more if you put on a lot of miles.

Try looking up the 06 Prius and see how much it's depreciated.
That might tell ya how much your car will be worth in 6 months or so.
Then deduct your car payments from your balance, and calculate
what the equity is.

Hope you like math!

[jcmt1013]

marzipan- bottom line, what conclusion can i come to once i know that number... what if the number (my equity) ends up being $5000, are they going to want to take the car?

thanks so much for the advice...

[SinkingFast]

What State do you live in??

We can help you check on your State's Vehicle Exemption and/or the possibility of using a WildCard as well.

[familyof7]

it also depends on if you are filing joint or not if filing joint it could give you a higher exemption

[lrprn]

bottom line, what conclusion can i come to once i know that number... what if the number (my equity) ends up being $5000, are they going to want to take the car?

To help you figure out the answer to your question, we need to ask three questions first - What state you are living in? Have you lived there continually for at least the last two years? Do you plan to reaffirm this car loan when you file? This way we can see what auto and other exemptions you are entitled to when you file bk.

Since your 2007 Prius is new, the loan is obviously much less than 910 days old. That means there can be no "cram down" on the value of the vehicle - you must use the total you owe the lender on the car on the day you file on the appropriate lines of your Schedules.

With a car as new as this one, there's a risk the recent purchase might raise a red flag for a more sticky trustee and/or your lender if you file in the next few months. They could be thinking, "How could you buy such an expensive car and then be so flat broke a few months later that you had to file Ch 7?" (Ch 13 would be more forgiving.)

Run this by several experienced bk lawyers in your area during your free consultations to see what they think and if it's a good idea to delay filing to reduce the chances you'll get a lender or trustee objection.

[jcmt1013]

thanks lrprn, you are so helpful.

here are the details:

i live in oregon and will be filing single (i am not married), won't be filing for another 6 months or so. i have $12,000 in credit card debt but my house is what is doing me in. i bought a house and can't keep up with the payment and will be facing foreclosure if a short sale i am working on now doesn't go through. i got a mortgage i couldn't afford when the housing market was skyrocketing... i put $20,000 down and $20,000 in payments (all the savings i had) in less than a year. the house value went up $30,000 in 30 days and then it fell about $60,000 in 4 months. i can't get rid of it and can't afford the payment. stupid stupid me. my car broke down a few months ago, i had to get a new car. i could have gotten a used one but my old toyota lasted 10 years so i went with another new toyota. this is not a luxury car. by the time i file (if i have to), it will be about 8 months from the time i bought it (i am guessing this will be less of a red flag than say 60 days before filing).

i think i would like to do chpt 7 but an open to suggestions. i don't want to keep the house, just my car.

i don't know what reaffirming means, but i have never been late on any of my loans or cc's (this will be the first month i can't afford my house payment, all my savings are gone). i have a great interest rate on the car, i don't want to do anything with the car loan except keep paying the loan until it is paid off. at the moment my credit scores are all above 750 (another reason i went ahead and bit the bullet and took out a new car loan), but that is all going to change starting in about 30 days....

let me know if i can answer any more questions.

i am afraid to meet with a lawyer yet, i'd rather put more time between my recent purchases and having it show on paper (by having a record of my meeting with lawyers) that i was thinking about filing.

like i said i put $6000 down (old car and down payment), and the car cost around $23000. is there any way i can keep my car?

thanks for all the advice guys! i appreciate it.

[lrprn]

i live in oregon and will be filing single (i am not married), won't be filing for another 6 months or so.

In Oregon your exemptions allow only $1,700 for motor vehicles. If you subtract the real value of your car from what you owe on it, what's do you get right now?

i think i would like to do chpt 7 but an open to suggestions. i don't want to keep the house, just my car.

You don't get to decide which chapter you can file (7 or 13). Since Oct 2005, the mandatory Means Test that your lawyer will help you complete is what decides (you can thank your congressional representatives for that).

You're single and filing in Oregon. A quick way to tell if you qualify for Ch 7 is to look at your total income from all sources for the last six full calendar months x 2 compared to the yearly median income for your family size (1) in Oregon which is $41,458. Are you above or below this? If you are above it by more than a thousand dollars, it's likely you'll only be allowed to file Ch 13. If you are below it, then it's likely you can file Ch 7.

i don't know what reaffirming means...

A reaffirmation is an agreement between you and your car lender that allows your car loan to stay in place as if your bankruptcy never took place.

If you later default on your car loan, your car lender's rights after bankruptcy are the same as before bankruptcy - you can be sued, garnished, etc. to collect the debt.

You should think carefully about reaffirming a debt and discuss your options with your attorney to fully understand the consequences. Most debts are reaffirmed according to the original terms of the agreement, although it is possible to negotiate modifications in some circumstances.

Here are some excellent links to read up on Ch 7 and Ch 13 bankruptcy before you set up free consultations with 3-4 bankruptcy lawyers in your area:

http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter7.html

http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter13.html

Hope this helps!

[jcmt1013]

oh sorry forgot to add that- i do qualify for chapter 7.

"If you subtract the real value of your car from what you owe on it, what's do you get right now?" = $6000 based on kbb 07 value – my loan.

because the allowance is only $1700, does that mean they would take my car?

thanks guys!

[JollyGG]

It means you need to look at your other exemptions and see if there is anything else you can cover the access equity with. If you cannot cover the equity you and the trustee can come to an agreement where you pay for the extra equity.
Look up some of amislanders posts re: her 4-runner.

[lrprn]

because the allowance is only $1700, does that mean they would take my car?

As jolly said, first let's look at your Oregon exemptions - http://www.bankruptcyaction.com/orexemptions.htm

Oregon has no wild card exemption ($ you can use to cover anything) and I don't see any other category that could be used to cover the $4300 of car equity. For this reason alone, I strongly suggest making appointments for free consultations with 3-4 bankruptcy lawyers in your area They will be familiar with how the trustees in your area handle cars that exceed the allowed exemption and have a good amount of equity.

Since your car is worth a lot more than you owe on it and you can't protect all of the equity with exemptions, some trustees may choose to seize the car and sell it to get $4K more to distribute to your creditors. Other trustees will be willing to "make a deal" with you to pay the trustee the $4K extra yourself to keep your car. Hopefully your trustee will be the second type (although you will lose $4K of your own money to keep the Prius - hope it's worth it).

[jcmt1013]

i can't thank you guys enough for all the helpful info on the topic. i guess i need to pray hard that my short sale will go through. ;)