Auto loan timing?

[happy_ira]

More confusement....

I had an auto lease that began in 2007 for a station wagon for our family. It expired August 21 2008 and I was had to "convert" it to an auto loan so that my large family could get around (we only have this one car). Will it look bad that I am now filing for Ch 7 even after just taking on a loan? If I didnt convert this to a loan, I wouldve been without a car (impossible for a family of 7) and besides the fact that it wouldve have been impossible to get a new lease/loan later after filing.

It might smell fishy, but I had no choice it seems.!

Any thoughts? Do I have to include it on my Form 22?

[WoodSprite]

Will it look bad that I am now filing for Ch 7 even after just taking on a loan? If I didnt convert this to a loan, I wouldve been without a car (impossible for a family of 7) and besides the fact that it wouldve have been impossible to get a new lease/loan later after filing.

Not at all...in fact, it's the sort of thing that a good attorney might well have advised you to do as part of your pre-BK planning. Just be aware that New York's automobile exemption is pretty low: $2,400. Now if you had just taken out a loan on a second car, say, a little red two-seater, you'd be in for some questions...

I've posted at some length on my angst over this issue, since it just seemed so wrong for me to sell a paid-for old car and finance a new one, but it didn't raise an eyebrow, and it allowed me to save my land. I guess it doesn't have to make sense, it just has to be legal.

[happy_ira]

Not at all...in fact, it's the sort of thing that a good attorney might well have advised you to do as part of your pre-BK planning. Just be aware that New York's automobile exemption is pretty low: $2,400. Now if you had just taken out a loan on a second car, say, a little red two-seater, you'd be in for some questions...

Of the vehicle price of $31,000, I was required by the auto loan bank to put down 2,000 last week (the minimum), and they financed the rest of it ($29,000k). So, will this $2,000 be exempt... and isn;t there a personal proprty exemption of $5,000 personal property?

[bcvw]

I'd bet as soon as you drove that car off the lot, you lost thousands in value and probably have no equity in it at all now. That would mean the exemption wouldn't apply, isn't needed, and you're OK now.

[happy_ira]

I'd bet as soon as you drove that car off the lot, you lost thousands in value and probably have no equity in it at all now. That would mean the exemption wouldn't apply, isn't needed, and you're OK now.

How do I prove/show that?

[bcvw]

Check out the value of the car used at kbb.com or edmunds.com

[bcvw]

For some reason I had it in my head that it was a new car, it's a 2007 and you already had leased it.

When you look up the value, be sure to select "Selling it on your own" (or something similar) and not "Dealer Price".

[WoodSprite]

Of the vehicle price of $31,000, I was required by the auto loan bank to put down 2,000 last week (the minimum), and they financed the rest of it ($29,000k). So, will this $2,000 be exempt... and isn;t there a personal proprty exemption of $5,000 personal property?

I'd bet as soon as you drove that car off the lot, you lost thousands in value and probably have no equity in it at all now. That would mean the exemption wouldn't apply, isn't needed, and you're OK now.

Yes! I'm so glad to hear you only put down $2,000. Long-term, this a terrible price to pay for a vehicle, but right this minute, this is great news, Ira, since you're allowed to exempt $2,400! So the $31K was the residual value, after the lease? If so, you're good...as I'm sure your atty will tell you.

If you Google "bankruptcy chapter 7 new york exemptions", you'll find any number of lists...

[bcvw]

For some reason I had it in my head that it was a new car, it's a 2007 and you already had leased it.

When you look up the value, be sure to select "Selling it on your own" (or something similar) and not "Dealer Price".

Just checked out Kbb.com. The terms I was trying to remember were "Private Party" & "Suggested Retail Price".

I ran it for my car and there is a 20% difference between the two prices.

[happy_ira]

Yes! I'm so glad to hear you only put down $2,000. Long-term, this a terrible price to pay for a vehicle, but right this minute, this is great news, Ira, since you're allowed to exempt $2,400! So the $31K was the residual value, after the lease? If so, you're good...as I'm sure your atty will tell you.

Wait - I'm confused.

The purchase price was $31k. I put down $2k. Thus, $29k is financed.

The KBB value ranges from $26k (private party value) to $23k (trade-in value). Both of these amounts are below the amount I am financing.

Therfore, doesn't it mean that my equity in the car is $0... so I dont have to exempt anything?

[bcvw]

Exactly!

[WoodSprite]

Wait - I'm confused.

The purchase price was $31k. I put down $2k. Thus, $29k is financed.

The KBB value ranges from $26k (private party value) to $23k (trade-in value). Both of these amounts are below the amount I am financing.

Therfore, doesn't it mean that my equity in the car is $0... so I dont have to exempt anything?

My understanding (someone will surely correct me if I'm wrong) is that the exemption is applied not to the value of the car, but the portion of it that YOU own - your equity. Regardless of the KBB value, you only have $2k into it, therefore you are under the $2,400 you're allowed in NY. If it were paid for, it would be an asset worth $23k-$26k, and you'd be in trouble. At this point, all that matters is that you're under the $2,400 limit, and KBB is irrelevant. Does that make sense?

[bcvw]

My understanding is that if the amount owed exceeds the market value of the car, then there is NO equity.

The $2K down payment is irrelevent. It is not equity. It has essentially evaporated.

[WoodSprite]

My understanding is that if the amount owed exceeds the market value of the car, then there is NO equity.

The $2K down payment is irrelevent. It is not equity. It has essentially evaporated.

Thanks, bcvw, I didn't understand that. So...either way, Ira's in good shape!

[bcvw]

Yep!