Car in parents name only

[ELBKnow]

I have two cars. They are in my mom and dad's names. We are not on the loans or insurance. We pay the payments and give them a check for insurance.

Will they need to know about our bankruptcy if we file?

[spetkovich]

The cars are legally owned by your parents, irrespective of your use and payment of the cars. Thus you would probably not have to declare them as assets on Sch. B.

However, each time you make a car payment, you are essentially paying an obligation on behalf of your parents. This aggregated amount would be reported on the SOFA question re: gifts.

[justbroke]

Yeah, this is an interesting situation. Worse case, is that they are insider creditors since the debt is an unsecured debt. If you paid more than $600 to them in aggregate over the preceding year... this can get real sticky!

I would certainly make sure you do this with an attorney and let him know what is going on.

[spetkovich]

I disagree-- the parents are not creditors, as there is no obligation to pay the car payments on their behalf. This is an issue of avoidable transfers, not an issue of insider creditors.

[justbroke]

I disagree-- the parents are not creditors, as there is no obligation to pay the car payments on their behalf. This is an issue of avoidable transfers, not an issue of insider creditors.

I don't know that they are "not" creditors. If they bought the cars "for" their child and the child agreed -- verbally -- to pay the note, that still makes them a creditor. I see it in both lights, especially if they try to schedule them.