what should i do?

[747LUVR]

Hey All, my wife I will be doing a ch 7 probably in the beginning of the year...its been so quiet amazingly-luckily-hold my breath since we defaulted in May. We have 2 car loans, both vehicles both loans amt to about $8k combined. I'm thinking of paying them off via 401k loan (about 75% less per month in pymts) but am not sure if I should just wait till after the ch7 is discharged. My concern is even though i'm taking out a loan to pay off those 2 notes, it may appear that they're owned clear and free since there would be no lienholder onthe titles....advice anyone? THANKS!!!

[keepmine]

Leave the 401K alone. It's an exempt asset.
If you do this, the cars are owned free and clear and if the value is above what your state exempts, the trustee could make a play for the cars.

[justbroke]

You may as well take the 401(k) loan check and sign it over to the Trustee. I wouldn't recommend converting exempt property (the 401(k)) into potential non-exempt property.

They would be considered "free and clear" as the 401(k) loan is an unsecured loan. Plus, you really need to factor the value of those vehicles. For example, how much do you owe versus how much they are actually worth. If you are upside down (have negative equity) then it may not be worth it to even keep the cars. You may be able to use the 401(k) loan after discharge to purchase a new (used) card.

These are things a good attorney can help you with so as to maximize your exemptions and to make sure you are financially stable once you get through this.

[albacore44]

and dont forget

you may need those payments to qualify for the Ch-7. I owed GMAC $12K on one of my vehicles with 16 months to go. Last march, I asked them to renegotiate the term and extend the loan out to 3 years. now the payment went down, but the interest went up. but it was all part of my strategy, so when i file, the UST wont say hey that car is almost paid off, and exclude the payment, and try to push me into a Ch-13. If they ask why i extended, i will just say I did it for a lower payment, which is the truth. and i looks like i have 0 equity, instead of an almost paid off car with equity that i would have to find an exemption for.

[DeadManCrawling]

We made a similar mistake, and I would say NO NO NO!!!

That retirement account cannot be touched by BK. But if the cars are paid off they can be seized and sold by the trustee.

It also jacks with your income in terms of the means test and can force you into a CH 13. You have te expenses of a car payment now, and that is a good thing. I know it may not seem so, but it really is.

Keep your exempt money (retirement) exempt. Otherwise you risk losing not just the money but one or both vehicles.

Our mistake was similar, but we took a home equity loan to repay credit cards. Just as bad, perhaps worse, since we are in FL.