Filing for Chapter 7, question about keeping car?

[ejhamilton]

My husband and I are both filing for Chapter 7 next summer. I know this is early, but I like to plan ahead. I have to use our income tax for the bankruptcy lawyer fees, and the rest of our income tax for a car. We are WELL below the median income, so I know we will have no problem filing. We have NOTHING of value in our apartment. The exemption for a car in our state is $3250. It's not easy to find a reliable car for that price. We currently have one car, with Chase
We had no choice when we got this car. We needed a car since we do not live near public transportation. The loan is like 24%, I know, outrageous. Learned my lesson.
I know when we file we will lose the car. I don't want to keep the $300 a month payment. We had been late many times, it's been a rough few years. However, I know when we file, our car's value will only be about $4000. We owe about $15,000. I know when they auction this car they aren't going to get much, I've seen similar cars for sale at auto dealerships for around $4500. What I want to know is would I have the option of buying this car? I am afraid that by saying I can front the $4000 for the car, the court might think I could pay more or whatever, but that's only $800 more than the exemption allowance, and it would kind of pay part of a debt.
Or am I stuck looking for a different used car?

By the way, I am learning so much from this forum. I appreciate all the info I can get from here so when I meet with a lawyer, at least I will know a little about what is going on.

[lrprn]

My husband and I are both filing for Chapter 7 next summer. I know this is early, but I like to plan ahead.

Planning your bankruptcy is the very best thing you can do to ensure it is successful - good for you!

I know when we file we will lose the car. ... I've seen similar cars for sale at auto dealerships for around $4500. What I want to know is would I have the option of buying this car? ... Or am I stuck looking for a different used car?

First important question is when did you buy the car? If it was more than 910 days ago, then you can cram the value of the car down when you file to what it's actually worth. However, you can't do this if the purchase was within the last 910 days. Which fits your situation?

If I understand what you are asking, you want to know if it's possible to make a deal with your auto lender to amend your loan and pay only what the car is worth rather than the full value of the loan. First of all, this is highly unlikely. The lender really doesn't care they won't get much for the car at auction. They just write the loss off on their taxes, so it's pretty much a wash for them.

Second of all, even if your lender did agree to a 'cramdown' deal, the IRS will see the $11,000 the lender adjusted as income to you and tax you for it accordingly. Do you have the money to pay the taxes on $11,000 just to keep the car? (My guess is no.)

Frankly your very best option is to let this car go and find another car after your Ch 7 closes. If you can pay cash for it, then that's the best option of all.

By the way, I am learning so much from this forum. I appreciate all the info I can get from here so when I meet with a lawyer, at least I will know a little about what is going on.

Glad to hear it! It's always best to learn as much as you can about bankruptcy and exactly how it works. That's how you protect your own interests best.

[ejhamilton]

You understood everything correctly, we bought the car around Feb or March of 2008, so by the time we file, I think it will be very close to 910 days.

I don't expect Chase to negotiate much, they are by far the worst car loan company I have ever dealt with in my entire life. But I figure an offer won't hurt us, just because we like our car.

We cannot go a day without a car so we will have to buy a used car before we file for bankruptcy and lose this car, it's our only car and has been for the past 2 years. No one we know has a car we can borrow and we live in a rural area. The nearest bus stop is over 5 miles away. Which is why I know we will have to stay under the exemption amount for our state, so they can't take the new(used) car away. We are both in college and my husband has a good job with a great employer so I'm not about to jeopardize that.

Thanks for the info and the support!

[keepmine]

The cramdoen/910 rule only applies to Chapter 13.

In a 7, you may consider a 722 redemption.

www.722redemption.com has a good explanation.

[ejhamilton]

yeah, i just read that cram down is only for 13. thanks for the info!