1st post :) Pre-bk car strategy help

[Leafgreen]

Hi all and TIA for your help. I've read many posts here and see that this is an incredible resource. You'll be seeing me a lot I think.

Facts: I plan to file BK7 in probably 2-3 months. I have a car worth $20k, owing $25k. I am current on payments of $531 per month. I've got a pmt. due in a few days. My credit rating is what you'd guess from not paying on four credit card balances for 7+ months, and two mortgages more than one year past due. yeah...

Here is what I think is the smartest plan for the car, based on what I've read: Stop making payments now. Let them repo it. Try to get financing on a new car, despite my credit rating. This will probably be in advance of filing BK7. Keep the new car payments current thru BK.
Feedback?

[SMinGA]

You may have trouble getting financing now - but you will likely have a couple of months in the current car before they repo it. Possibly can keep it til you file, then the automatic stay buys you at least 1-3 months more. (If they file to lift the stay, they can take it sooner. If not - after discharge.)

If you can manage to hold onto it until you file, in all that could be 3-5 months or so of saving $531 a month. At discharge, everyone will want to finance you - though the rates may not be pretty. (Seems car dealerships pounce on newly discharged, knowing you can't file again for a while.) Having $1500-2500 to put down will help, plus by then at least some of your accounts will no longer report a balance owed which will help your debt to income ratio.

[tdawg]

Hi all and TIA for your help. I've read many posts here and see that this is an incredible resource. You'll be seeing me a lot I think.

Facts: I plan to file BK7 in probably 2-3 months. I have a car worth $20k, owing $25k. I am current on payments of $531 per month. I've got a pmt. due in a few days. My credit rating is what you'd guess from not paying on four credit card balances for 7+ months, and two mortgages more than one year past due. yeah...

Here is what I think is the smartest plan for the car, based on what I've read: Stop making payments now. Let them repo it. Try to get financing on a new car, despite my credit rating. This will probably be in advance of filing BK7. Keep the new car payments current thru BK.
Feedback?

if you are close on the means test or Schedule I - J, then you could have problems if you let it get repoed before you file. Why not keep it current, then after you file stop paying, save the car payment you'd be paying, and once you're discharged buy something for cash for $2,000 or so? Then you don't have to pay the massive amounts in cash. If you look at how much of your car payment goes to finance charges when you're paying a high interest rate, it might surprise you. Just my .02. Good luck whatever you decide to do.

[AngelinaCatHub]

if you are close on the means test or Schedule I - J, then you could have problems if you let it get repoed before you file. Why not keep it current, then after you file stop paying, save the car payment you'd be paying, and once you're discharged buy something for cash for $2,000 or so? Then you don't have to pay the massive amounts in cash. If you look at how much of your car payment goes to finance charges when you're paying a high interest rate, it might surprise you. Just my .02. Good luck whatever you decide to do.

This is excellent advice. I'll add my .02 cents and you'll double your money towards your new car.

My advice as above is why NEW car? It depreciates 1/3 the minute you drive it off the lot. It becomes used once you sign the dotted line. There are SOOO many good used cars as people like us are giving up the extra cars and there are many 'distressed' sales too. Once bk, start looking for a "cherry" used car. You got time. 'Hub

[SMinGA]

I agree with the used car strategy - though I realize that in all situations a $2000 'cash' car won't work and can often be more costly due to repairs. But that does not mean that only a brand new car is the only option. There are many 2-3 year old decent mileage vehicles out there. Lease turn ins, recently repo'ed as a result of this economy, etc.

[JackBondLove]

I agree with the used car strategy - though I realize that in all situations a $2000 'cash' car won't work and can often be more costly due to repairs. But that does not mean that only a brand new car is the only option. There are many 2-3 year old decent mileage vehicles out there. Lease turn ins, recently repo'ed as a result of this economy, etc.

Yes, you may have a lot of repair and maintenance on your old car, but it will be depreciating at a very slow rate, so the R & M would basically be the depreciation.

[Leafgreen]

Thanks all for your feedback. I should have mentioned the fact that I use my car for my work, so it's my understanding that it is a Tool of the Trade and be exempt. Therefore, since it is underwater by $6k, I think the strategy is to stop paying now, get another car (new or used...another discussion ) but *financed before BK*. Then during BK the next car will also be exempt and the debt for it will be wiped out too?

[StartingOver08]

No, if you are keeping a vehicle then the debt is not wiped out on the car when you file BK. There is still the security interest (lien) on the car. Your personal liability for repayment is removed so you can give the car back without the repo showing on your credit report should the payment become too much for you after your discharge.

If you surrender the vehicle, then the debt is wiped out.

Are you sure you can put your vehicle in under tools of trade? Most states have a separate vehcile exemption. Make sure to check this with your attorney. In FL, the vehicle exemption is $1000 which means you are allowed a total of $1000 of equity in your vehicle.