redeeming an automobile in installments

[4shame]

Hi all. First off, thanks for all the terrific info that so many of you have posted - it has been a huge help to me.

I'm educating myself on the bk process and don't think that I'll be filing for a few months yet. I'm married, but will file alone as my wife won't consider filing. I have about $250K in assets, about $350K in debts, $90K of which is unsecured.

I'm reading the Nolo book on C7 bankruptcies and the authors say that you can redeem any asset used as security on a loan by paying it's replacement cost. In other words, by paying the creditor what it's worth regardless of what you owe. This can be by a lump sum or in installments - if the creditor agrees to such an arrangement. Has anyone here actually gotten a creditor accept an Agreement for Installment Redemption of Property? I haven't spoke with any attorneys yet and I'm wondering if this is even a realistic thing to consider.

Here's what I want to do:

Auto Loan: $514/mo @1.9% for 72 mos. (65 mos. remain)
Current Bal: $31,500
Replacement Cost: $24,000

Installment redemption:

Debtor agrees to pay $24K in 65 monthly installments at the same interest rate as the previous contract.

Nolo's example uses the 'same interest rate' language. Is this realistic? Ford Motor Credit is the creditor.

[lrprn]

Welcome to BK Forum, 4shame - glad you decided to come out of lurk mode!

Before we can answer your questions about redeeming your car loan, we need a few more pieces of information:

What is your income from all sources over the last six calendar months?

What state are you in?

How much of your debt is co-owned by your wife? Whose names are listed on your house loans? On the house deed? How about credit cards that you both signed for?

What assets do you hope to keep after bankruptcy? Your home? Cars? Other property or secured assets?

With the high debt load you listed, I'm guessing that there's a failed or failing business involved here. Am I right?

Thanks for being patient with all the questions. It's easier to help you sort out your options if we understand your situation better.

[4shame]

Welcome to BK Forum, 4shame - glad you decided to come out of lurk mode!

Before we can answer your questions about redeeming your car loan, we need a few more pieces of information:

What is your income from all sources over the last six calendar months?

What state are you in?

How much of your debt is co-owned by your wife? Whose names are listed on your house loans? On the house deed? How about credit cards that you both signed for?

What assets do you hope to keep after bankruptcy? Your home? Cars? Other property or secured assets?

With the high debt load you listed, I'm guessing that there's a failed or failing business involved here. Am I right?

Thanks for being patient with all the questions. It's easier to help you sort out your options if we understand your situation better.

Hi lrprn. I'm pleased you replied to this - you seem to know what you're talking about. Whew. You're sure want all of this? Here's my life, to date...

My wife and I are currently employed, but she must quit her job if we're to meet the means test. I will meet with three lawyers this week and based on what they say, she will put in her notice and we will take that first step onto the slippery slope.

I make $80k and she makes $30k, give or take several hundred.

We live in Missouri.

Debt liability:
1st mortgage (joint) = $140K
2nd mortgage (joint) = $56K
1st car (just me) = $31K
2nd car (joint) = $32K --> this is the car I mentioned, above.
3rd car (just me) = $6K
Unsecured (just me) = $74K
Unsecured (joint) = $4K
Unsecured (just her) = $7K

One major issue I have is that I have taken out loans against my 401K totalling $30K and $780/mo to keep us afloat. It is unclear to me if this counts in the means test calculation.

There is no failed business here, just failed judgement.

Some considerations:
I have three kids, one is 18 and has postphoned school due to my situation. One is 15 and in a parochial school that costs $550/mo. The other is 10 and her tuition is $310/mo. I understand that the trustee is pretty much unconcerned with my desire to keep my kids in these schools. I will, however, make major sacrifices to keep them there.

3rd car (18 yo daughter) has significant equity. Replacement value = $11K, loan bal = $6K.

I have a couple wave runners with a book value of about $5K. We blew the motor in one of these a couple mos. ago.

[lrprn]

My wife and I are currently employed, but she must quit her job if we're to meet the means test. I will meet with three lawyers this week and based on what they say, she will put in her notice and we will take that first step onto the slippery slope. I make $80k and she makes $30k, give or take several hundred. We live in Missouri.

Assuming that you are still going to make $80K after your wife quits, the median income in Missouri for a family of five is $72,809 - http://www.usdoj.gov/ust/eo/bapcpa/2...come_table.htm . Even without your wife's income for six full months, you are still $7-8,000 above the median on your income alone for your family size. That means you have to continue on in the required Means Test to see if you can qualify as an above-median filer for Ch 7.

If you would like to try filling out the Means Test yourself to get an idea of what's going to happen (no guarantees, of course), here's a link to an online practice site - http://www.legalconsumer.com/bankrup...0801#QuickTest . Go to the top of the page and enter your zip code. This test will automatically calculate some of the required figures that aren't your actual figures.

One major issue I have is that I have taken out loans against my 401K totalling $30K and $780/mo to keep us afloat. It is unclear to me if this counts in the means test calculation.

Yes, the latest bankruptcy case law decisions allow 401K loans to be included as expenses.

About kids in private schools - how trustees see this varies quite a bit between districts, even between trustees in the same district. It's luck of the draw as to how your trustee will see this expense. This is an excellent question to add to your questions to ask during your lawyer interviews.

3rd car (18 yo daughter) has significant equity. Replacement value = $11K, loan bal = $6K.

This will be an issue because your MO exemptions allow for a $1,000 auto exemption - http://www.bankruptcyinformation.com/MO_exemp.htm . Even adding in the MO wild card of $1250 for head of family + $250 for each child won't cover the equity on just this one car. Be sure to ask the lawyers you are interviewing about this.

I have a couple wave runners with a book value of about $5K. We blew the motor in one of these a couple mos. ago.

These will need to be listed as assets at their current market value on the Means Test.

You didn't tell us how much equity you have in your home. MO homestead exemption protects just $8000 (and couples may not double). This is another question to ask the lawyers you interview.

Hope this helps a bit. Keep asking questions - we'll help you sort things out as much as we can!

[4shame]

Thanks again lrprn. *sigh* There is NOTHING fun about this, is there? I have no equity in my home. My best guess as to it's value is $180K and I owe $196K between 1st and 2nd mortgages.

If my wife has zero income, I pass the means test at legalconsumer with a disposable income of -$1K/mo. If the trustee will allow my 401K loan expense, I could file in a few months. I'm not comfortable that is assured and can't risk it.

Oh yeah, I could care about the wave runners. I bought them to help keep my family together; interested in spending time together. Seems there are bigger fish to fry nowadays...

[rrockinggramma]

As to your vehicle and your question on redemption, you should read the posts on the 722 redemption. That sounds like it might be your best bet if you file a chapter 7. good luck to you and your family.

[cathywhite4495]

One consideration - the joint debts would not be discharged unless your wife also files. It seems like you would still have a lot of debt left to deal with. I think your case is one that you would definitely want to talk to some lawyers before your wife quits her job or you take any other actions.

[4shame]

Thanks Grandma & Cathy. I'm going to go read the 722 postings right now. I've made some mistakes, and I understand how important it is to get this right. I will be talking with a couple attorneys Thursday.

Any opinions on the third car? Replacement value = $11k and I owe $6k on it. The Nolo book says that a debt like this should be redeemed and the trustee will generally accept that. Hmmm. I'm looking in the book now and can't find these exact words, so maybe wishful thinking is kicking in here.