When/If To Stop Making Car Payments?

[WPMax]

Hello all and thanks for all the great info provided here on the forum.

My wife and I are preparing to file chapter 7 in a month or two. I have a car that I might want to keep if the bank is willing to negotiate away $4000 in negative equity I have on it. It is worth about $12,000 and I owe $16,000 on it. I really don't want to keep it unless they will discharge the negative equity.

The car has aver 40K on it and I have over 4 years to pay on it. As a sales rep I put on over 30K a year and in 4 years the car will have 160K on it (if it makes it that far). I see this as a good opportunity to dump the negative equity and get something a little more economical.

1. Since I am not sure I want to keep it should I continue to make payments on it?
2. Can I stop paying and negotiate myself before filing?
3. Is 5th 3rd Bank even going to try to negotiate better terms for me or want it back?
4. Who, how, or what determines the actual value of a vehicle in bankruptcy?

Thanks.

[EveryDayAdam]

1) Stop making payments, but put that payment money aside...including any late fees you might end up owing. To me it sounds like you are leaning more towards getting rid of the car. I doubt the bank is going to negotiate the negative equity away...but it doesn't hurt to ask. If they agree, then immediately pay all your past due payments and late fees so you aren't behind. If not, then use the payment money towards a nice down payment on another car...if you can exempt the cash during your 7.

2) Yes!

3) It depends on how much you make it worth it to the bank: If they would lose more money on repossessing it than they would lose in forgiving the negative equity then they will probably agree. It all depends on how much they stand to lose.

4) The value of the vehicle is determine by it's trade in value. Typically set by KBB. If you were to go to a car dealer and ask for cash on your trade in, how much would you get on the spot?

just one thing: If you decide to get rid of the vehicle, DON'T TURN IT IN to the bank until AFTER you file for BK. If you turn it in before hand, they can report a repo on your credit report. If you do it after, then they can not. It will look better for getting a car after BK if you don't have the REPO.

[WPMax]

Thanks for the quick and informative reply! One more question as far as timing goes:
How many payments can I miss before the car is repoed? I don't want to stop paying too far in advance and loose the car before I file.

[CindyLou]

Hi and Welcome!! First of all, don't stop making any payments until you have been told to by your attorney!!!

It is extremely unlikely that the bank will negotiate with you. I would say almost impossible actually. If you are filing a 7 and the car if that far upside down, then you should probably plan on giving the car back at some point. I would probably make at least one more "slow" payment on the car to get you to the automatic stay. By slow payment...don't let it get more than 30 days past due so that you don't end up with a repo prior to the BK.

[MajorMike]

The bank we have will only work with my attorney but apparently they will widdle down the negative equity if they know I'm filing because they know I can just dump it anyway. My attorney said he is going to work on it now that it's filed. My payment was due on the 19th of last month and my payment to the trustee includes that car payment of which I'm paying Nov 2nd. Should I make one more payment or not? If I dont, will they be more willing to take the negative equity off?

[keepmine]

Mike,

You're in a Chapter 13 and that's a different animal. If you owned the car for over 910 days, you should be able to execute a cramdown. Id that what your lawyer is talking about?