Sell my car to pay income taxes?

[rwphil]

I will be filing Chapter 7 in Oregon. I owe ~ $13,000 in Federal income tax for 2007, which I know is not dischargeable. I own my vehicle with a clear title (2000 Dodge Ram 2500 4x4 diesel w/ 97,000 miles). I'm not sure how to value the vehicle as it's in poor to fair condition, and KBB only values fair. The KBB "fair" condition value is $11,000. It has a broken windshield, dents/dings/scrapes, some rust spots, bald tires, possible frame damage from a previous accident, needs new pump for power steering/brakes, leaks water in the cab during heavy rains, etc, but generally drives well and the engine is fine.

The Oregon exemption for vehicles is $2,150, and I have no other exempt property of appropriate value to substitute. I'd really like to keep the car, but I'm guessing the trustee will require money from me or I'll have to surrender it. Is it likely the trustee will take the car in this condition? If so, I would receive $2,150 from proceeds of the sale, correct? If the trustee takes the truck and sells it, what would happen with the remainder of the proceeds? Would they all go do the IRS to cover the tax debt, or would they be spread among my unsecured creditors as well? (~ $70,000 in credit card debt.)

Obviously, I'd prefer to offset the IRS debt, as I'll still be responsible for it after bankruptcy. What would happen if I sell the truck prior to filing and use the sales proceeds to pay the IRS? I'm not supposed to make preferential payments to creditors just prior to filing. What about selling the truck and using the proceeds to buy property that would be considered exempt?

I need to file soon and don't really have the time to try and sell a vehicle in this condition in this market. It's crazy to me that Oregon exempts $7,500 in cash savings, but only $2,100 in vehicle equity. By the way, Oregon does not have an applicable wildcard exemption.

[debtmonster]

Dodge

I can't see how that old truck would be worth $13k with that many miles and the cost of diesel fuel being $5/gallon.

A friend of mine has a 1999 Dodge Durango 4x4 with 93,000 miles on it and the trade-in value is only $2500. I said for that little money, he'd be better off keeping it forever. It's worth more to him than the money.

[BK2008]

Seeing how much you owe to the IRS, you could always try a OIC (Offer in Compromise), and see if you can get the debt reduced and on a payment plan. There is no way selling your truck will cover near all of that, and besides, you need wheels to get to work (unless you have another vehicle?)

Check you value on this website http://www.nada.com/ instead of Kelly Blue Book. The dealers more likely use NADA values to value a trade in, and it isn't as generous as KBB. Then you have a better idea of what your vehicle is worth, and perhaps can keep your vehicle instead of surrendering.

[BKParalegal]

If you need a truck for your job then exempt the first $2,150 under Motor vehicle and the rest under Tools of Trade, you get $6k in that exemption. Based on your description your truck isn't worth much at all, be aggressive, I doubt the trustee will care.

Good Luck

[fltoo]

The IRS payment is not a pref payment. I would like to see the trustee tangle with the IRS. Would be fun to see that one! lol

I paid the IRS over 20 grand in the past two years. Lawyer says no problem.

[Priceless ProSe]

I agree with using the tools of the trade exemption, I would also try finding a different site to get a value. Better yet, goto carmax or one of those places that buys cars garunteed and ask them to give you a written estimate of what they will give you so you can think it over. Use this paper as proof of the trucks worth, it will be more than sufficient. There is no way carmax is going to offer you more than 3k for that rig (No offense). I took my 2002 expedition there last year, it was in great shape with 100k miles, they offered me less than 4k. Be creative...