Sell car before chapter 7

[sarasota7]

I have an old beater that I will keep as the family car, I also have a car that on paper is valued around 10k thats paid off. My wife makes around 50k we have 2 children, I don't work and will be a full time student this fall. Can I sell the pricey car to pay for the lawyer? I don't want to get involved with any fraud and would sell it to carmax instead of a private party to avoid the appearance of fraud. The car is in poor condition and I would guess carmax would give me around 3500-5000 for it. I plan on going bankrupt as soon as possible.

We lost a house due to poor rehab planning (no permit and the city required me to use an architect, cheapest I could find in 2005 was around 10k) and loss of overtime at work, I gutted the house due to a mold problem. We took out a 48k second mortgage on top of the 157k already owed to do the rehab, no funny loans, both were fixed 30 year at 6-7%. I paid my bills with the 48k loan untill it was gone. We also have credit card debt of around 10k. Nervous about even going to a lawyer but we know we have to do it. Thanks

[FreshLikeADaisy]

Sarasota, you are wise to ask this BEFORE you sold the car.

Yes, you can sell the car to pay for the atty, but keep excellent records: it WILL come up again. You will have to list the sale on Form 7, Statement of Financial Affairs, and the trustee is bound to ask very thorough questions about it. You have to do everything in your power to ensure that all aspects of the sale are aboveboard and do not even remotely resemble asset hiding in any respect.

Do yourself a favor: if there's any other way to pay for the atty, definitely pursue it, but if you do sell the car take pictures and get an estimate of its value first (with all its faults because you will not be selling it for book value and you need to be able to document for the trustee exactly why not), retain all the paperwork, and whatever you spend the money on keep the receipts, making sure that there are no purchases that could be considered luxuries. Food, bills, gas, clothes, repairs -- all those are fine. No jewelry, vacations, plastic surgery... you get the picture.

Many bk attys offer free consults; you may want to avail yourself of 2 or 3 *before* you sell the car... it could save you a lot of trouble. Don't go to just one, either: you really do need to meet with several even if you don't file right away or at all, just to ensure that this car sale doesn't seriously endanger your eventual Ch7 and you're getting consistent, thorough info from the attys. Good luck!!!

[olly7011]

My wife and I did the same thing. We sold our SUV to pay for the atty and buy some other necessities. Just make a list of thing you need and have your atty approve it.

[WoodSprite]

Sarasota, my attorney advised me to do exactly the same thing, and I had more angst about this decision than any other aspect of the whole BK process. My CR-V was worth 10K, it was paid for, it was in great shape, and I loved it - although I'm not the type to get attached to cars.

The trouble is, I live off the grid in the middle of nowhere, on a really, REALLY steep dirt road which isn't maintained in the winter (which can last 6 months at this elevation), and I NEED a reliable vehicle with 4 wheel drive: three different people have ended up in the hospital in the last year as a result of accidents on this road, and I rolled over my last truck a few months after moving here. Buying a $2,000 beater was not an option.

My attorney told me I should try to lease a new car, since I'd have no equity in it that way, and incidentally it would be a great way to pay his fees as well. I thought he was out of his mind! Even if I could get a lease approved with my finances going up in flames - I'm going to show up at a 341 meeting with a brand spanking new car??

Well, he was right. He couldn't do anything for me until I unloaded this asset, and figuring I had nothing to lose, I took my CR-V back to the dealer I bought it from and laid it on the line. Told him my whole sob story (which perhaps I'll share here once it's all over), told him I needed to get rid of this car, that I was filing for bankruptcy..the whole thing. It seems a decent sort of place in general, I'd already bought one car from him, and I figured from his standpoint a commission is a commission, so why should he care about the state of my finances? It's in the dealership's best interest to make a sale at any cost (probably even more so now), right, and I'm virtually guaranteed to come back yet again in a few years? I still can't believe how hard the woman who arranges financing worked to find somebody willing to make this lease. It took her a full three weeks, but she showed them my 25+ years of perfect credit, explained the circumstances, and finally got Honda Financial (not even some fly-by-night joint) to offer me a lease. Wouldn't have happened if I hadn't spilled my guts. I haven't told ANYONE else - not even my best friend - about this, but I'm really glad I told them my whole story.

Yes, the terms are appalling. Leases are stupid. Buying new cars is more stupid. The payments are painful, and I'm indentured to a car I didn't want and don't much like for four long years, at the end of which I'll have nothing. But it was the best choice available to me in the circumstances. It's safe and reliable, and I saved enough from the trade-in to pay the attorney AND finish the shack on my little homestead, at least enough so that I can honestly say it is my primary residence. So I get to exempt my home (which is rough, but totally free-and-clear), which was the most important thing in the world to me. And I was able to begin rebuilding my credit before I'd even FILED.

My attorney was extremely clear about HOW to do this, and exactly WHAT to spend the money on. He said "call me before you spend a cent, and keep every receipt". I followed his advice scrupulously...spent it on attorney/court fees, a septic system, a well pump, tar paper and shingles. Put it INTO the exempt homestead, don't turn it into assets. Convinced the whole time, of course that I was going to lose it all.

Well, my 341 was Friday, and the trustee seemed a lot more interested in what it was like to live without electricity than in why I have such a "great" car. 5 minutes...standard questions she asked everyone else...a little chit-chat, then "good luck to you - next case". This morning PACER says "341 Meeting of Creditors Closed. Debtor(s) Examined - No Asset MEANSNO".

I begin to hope...

[sarasota7]

Thanks for the info, I called lawyers and have appts. NMA

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