Need Information on having 3 cars

[Ann]

Still unsure here if I am able to file for 7 or 13... I have a home I want to keep and I just remembered I don't have 2 cars I have 3! My son's car is really in my husband's name but it is a very old car with well over 100,000 miles on it with some very serious body damage to it. Both cars are probably worth about 12,000 with only 1 year left to pay on each. I took a sample means test and after messing around a few times it says I had too many expenses left over to pay back my creditors so a chapter 7 is possible. My question is (and I know it sounds really silly) can my 3 cars be exempt and how can I do that? Also, why can I not strip my second mortgage with a chapter 7? My second mortgage is over 700 per month now. If I file 13 then that will go away (not enough equity) in 5 years as opposed to it being there for the next 15 with a chapter 7... Please somebody give me some very much needed input. Thanks

[Trixie007]

We filed Ch 7 with 3 cars - one paid for, worth 3k, one paid for, worth maybe 1k, one financed, zero equity. We covered the 2 cars with the exemptions for autos, the third didn't require an exemption since we have no equity.

[mamaluv]

How much do you owe on the 2 cars worth $12k? You'll need to check your states exemptions.

[eddiep]

It depends on your state. Some states have generous allowances that can be used for any property, some do not. You will have to check your exemption allowance.

[Ann]

Hi... I have about 6000 on one and about 5000 on the other with only 1 year left on each to pay for. I looked up the bb value on each and I owe less than what they would sell for. I know I probably have too much equity in them I'm afraid.

[catleg]

Ann, first of all you are allowed to use the federal exemptions in Michigan which allows $3225 for a motor vehicle (x2 counting your husband's) and as well, if you are talking about lien stripping presumably you aren't using your $20,200 homestead exemption and you can thus use $10,125 as a wild card to cover any other property. So your cars should be fine.

As long as your chapter 13 plan payment is less than what you are currently paying on the unsecured 2nd mortgage, then you're better off with a chapter 13 than a chapter 7, unless you are prepared to walk away from the house .

If you encounter job loss during the chapter 13 plan, and you can't make the payments, then probably you convert to a chapter 7, and you're going to have to move anyway because if you can't make the plan payment you can't make the 2nd mortgage payment either.

Another interesting side effect of this calculation is if you decide to move inside the 5 years that the plan runs, you just convert to a chapter 7, and walk away from the house, rather than sell.

If you're content to live in the same house for the next 5 years, you should be fine with the chapter 13. The other factor which comes into play is whether you expect any major pay increase or inheritance in the next few years, that might auger in favor of a chapter 7, but again, you have a known cost of filing chapter 7, which is the money you're spending on the 2nd mortgage payment, totally wasted, unless you're prepared to abandon the house.