Best Options for Excess Equity in Vehicle?

[Lindsay]

We hope to file Chapter 7 within the next month or so. We've finally fully paid off our fees to our attorney. But there is a bone of contention, of course.

We have a 2004 truck that is nearly paid off. We owe about $3800 on it and the KBB value for private party (thats what our lawyer uses) is $15,000. We were hoping to keep the truck as it is our only vehicle and we've taken wonderful care of it. However, I was stunned to see the value that high. We're in NY and there is only a $2400 vehicle exemption. If the value was lower, we were considering redeeming it by borrowing from my parents and paying the trustee the extra value. But now its way too much so I'm not sure what to do.

What are the best options here? Would it be better to sell the truck now, purchase a cheap car or minivan and use the extra funds to pay our overdue property taxes and replace a dying refridgerator? Or would it be better to trade it in and get a newer vehicle? I really don't want car payments anymore after the bankruptcy. I also don't want to do anything that would enrage or upset the trustee.

I'd hate to waste the equity in the truck and have the trustee use it for the creditors when we're so broke right now (and behind $5000+ on property taxes). The house has no equity and basically the truck is the only asset that we own.

Also, can you sell a truck that still has money owed on it? The lein is from Nissan and we still owe $3800 to get them off the title.

Any advice would be welcomed and appreciated. Thank you so much.

[AngelinaCatHub]

OK, you have three choices: One, keep the item and see what the Trustee sees in it. You may have to pay a “compromise” and they give you time to do this.

Two: You can let the Trustee have it and attempt to sell it for equity. If he cannot sell it, (the lien has to be satisfied at sale) he has to return it to you.

Three: You may reaffirm the debt meaning that you MUST pay for it, and it becomes outside of bk protection. This has to be approved by the Court and usually is, unless your income shows you just can’t do this.

Also, about dying refrigerators. We purchased one at a yard sale for 100 bucks five years ago. Runs like a top. Stuff like this is little cost these days if you search the papers or Internet. Not to worry. ‘Hub

[Tromploi]

We had equity in our vehicle and included what was beyond the vehicle exemption in our wildcard. Keeping it and not reaffirming it.

[Lindsay]

Thanks, Angelina! Would selling it be an option; we haven't actually filed yet. Also, my husband is a mechanic so he does use the truck for work and road service. I'm not sure if that counts under the Tools of the Trade exemption in New York.

[nychic74]

Lindsay, I am in the same boat right now. We have about 7,500 in equity in our only car. My husband works nights and I currently stay home with the kids so it hasn't been an issue. I actually have an appointment with a bk lawyer on Monday. I really hope we can figure something out. The $2400 exemption stinks, I wish it were more!!

Also, I bet you can use the truck for a tools of the trade exemption since he actually uses it for work.

[Lindsay]

Nychic,
He does use it for work, but I bet the trustee could demand a cheaper truck be bought. I don't have a problem with driving in a vehicle thats not as nice, but there are slim pickings in the classifieds. Anything decent or safe is way over the limit.

I have to mail some paperwork to the attorney about the truck this week. They want KBB private party value and the amount owed on our truck. I'm just going to submit that and see what they say about the tools of the trade exemption. Also, our truck wouldn't actually get what the KBB said because it has a negative carfax report due to an accident in 2005. The vehicle currently has some hail damage dents on it that we didn't bother to get fixed because I was afraid they'd raise our insurance rates. I don't know if we could get a private appraisal to give to the trustee. I was thinking of taking it to a dealership and seeing what they'd give me if I sold it to them outright. Would this work in BK court to establish value?

Please let me know what your lawyer says when you see him. The $2400 vehicle exemption is so little; I could only find the worst jalopies on Craig's List in that price range in our area. Some people wanted $4000 for rusty cars with 225,000 miles.

If we couldn't get it exempted and we did decide to buy it back from the trustee, what kind of time frame does the trustee give you to pay it off? I know the discharge is usually in 60 days; does the "compromise" have to paid before the BK is discharged?

You know, I thought I'd be more relaxed about this whole process, but I'm so scared since we finished paying off the lawyer.

[nychic74]

Lindsay, Met with Lawyer today and did find out a few things. First she told us that they definitely would sell the car and that we had a few options to keep it:

-the trustee would take it, sell it, give us 2400.00 dollars(since it is only in my husbands name).
-give us the opportunity to buy it back for around $6000.00 but not only do we get the opportunity so does everyone else so we are not guaranteed to be able to purchase it back
-file chapter 13 and keep the car
-get another car with no equity in excess of 2400.00

We have decided to go ahead and do a chapter 13. It will only mean we have payments to the trustee of about 100.00 for 3 years and with our credit being bad we can't afford to get another car reasonably.......

Hope this helps and good luck!!

[lolasaurus]

Just to confirm for myself, I have a GTO that I owe $12k on, worth maybe $18k (just going from memory on both numbers, it is what it is).

I would like to keep it; it's got equity, it's 0% interest, it's $298/mo, it's a good, fun car, bought before I knew I was going to have a kid and long before we knew we'd be destroyed by medical bills. Of course it's not the world to me or anything, I'll give it up if it's the smart move, but if I can, I'd like to keep it.

By reaffirming it, does that mean they can't/won't liquidate it to come up with the maybe $6k they could make off the sale, even though vehicle exemptions are not that high?

This assumes that I couldn't find another way to exempt it with the wildcard exemptions or whatever else, I'm just asking more of a theoretical here.

[jeb]

The $2400 vehicle exemption is so little; I could only find the worst jalopies on Craig's List in that price range in our area.

Try $1,000.00 like us in Florida. - jb