Anyone get a New Car right before Filing???

[joyoflivin]

Hi-I posted yesterday that I just bought a new car through my credit union and because of cross/collateral was thinking about trading it in by the end of the month before my credit starts showing past due (right now am current with a credit score of about 700) If I trade it in and they pay off the car loan through the credit union then I can throw my line of credit in (10K) without having to worry about a cross/collateral and a possible repo!

We haven't even made our 1st car payment yet, it's due June. I called the dealer today and said I wanted the same car only a slightly different model and the newer 2010 (we got a used 2008 with low miles). My Credit score has gone up and I qualify for an even lower interest rate than the one my hubby got (I removed myself from all his cards that I was only an authorized user on) thinking I wasn't going to include myself in the bkcy but after the atty heard I had 20K myself he was like you are crazy! Anyhow....I am feeling really nervous about doing this. I guess I feel like I am comitting some kind of fraud knowing I am going to be filing within the next 6 weeks or so. Anyone get a new loan right before filing?

[LadyInTheRed]

I financed a new car 5 weeks before filing, after having two attorneys say it was okay. I don't think it is fraud to buy a car and then file BK if you plan to reaffirm the debt. Incurring debt without the intent to pay is what is fraudulent.

I understand you reluctance. It felt weird to me too. Check with your attorney. If he says it's okay, do it and don't worry about it.

[Exployer1234]

If I am thinking correctly you can not file on loans that you have made within the past 180 days. I will have to look at what my BK papers say. Are you filing 13 or 7?

[Exployer1234]

Here is what my Chapter 7 paperwork states:

"If you incurred new credit of $500 or more for "luxury goods or services" within the 90-day period before your bankruptcy, or if you obtain a cash advance in the amount of $750 with 70-day period before your bankruptcy, the debt is presumed to be non-discharageable".

[joyoflivin]

I plan to reaffirm it.

[GWBcasualty]

Here is what my Chapter 7 paperwork states:

"If you incurred new credit of $500 or more for "luxury goods or services" within the 90-day period before your bankruptcy, or if you obtain a cash advance in the amount of $750 with 70-day period before your bankruptcy, the debt is presumed to be non-discharageable".

Secured debt is a different story... it's SECURED.

You need to make sure that the lien is perfected before filing. If the lien is not perfected than the debt is unsecured and the trustee can avoid the transaction.

[btbeme]

My attorney said that this is frowned on, but allowable. And yes, make sure the lein is perfected before filing, or the Trustee will have a nice new car to sell.

Perfection takes 2-3 months sometimes, so be advised.

In our case, that was something I was leaning toward doing, but we already have a small handful of "wrinkles" in our filing, so I did not want to throw another log on the fire. I'd rather avoid lengthly explanations, a 2004 meeting, or other complications. Our cars are OK, not great, but I have found a different way to protect the extra equity we have in them.

[LadyInTheRed]

And yes, make sure the lein is perfected before filing, or the Trustee will have a nice new car to sell.

Perfection takes 2-3 months sometimes, so be advised.

If a buyer finances the car with a loan secured by the car, the buyer doesn't ever get clear title until the loan is paid. Either the car is in the name of the seller or it is in the name of the buyer subject to the lien. Either way, the trustee can't take the car.

I can't see how the timing of the perfection of the lien will have any effect on the BK.

[Faust]

We bought a car in Dec and filed in January.

We are keeping both cars.

[GWBcasualty]

I can't see how the timing of the perfection of the lien will have any effect on the BK.

Even if it doesn't feel right, that is BK law.

This is the way the law sees it:
- You borrowed $10k from Bank XYZ
- You bought a car worth $10K

If you file BK and the lien is not perfected by securing the interest on the car, according to BK law, the $10k you borrowed are unsecured and the car belongs to the estate and therefore it can be sold unless you can exempt it.

As long as the Bank record the lien with the DMV before the 30 days (it used to be 20...) it's all good.

11 USC 547 - Preferences
(c) The trustee may not avoid under this section a transfer--

(1) to the extent that such transfer was--

(A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor; and

(B) in fact a substantially contemporaneous exchange;

(2) to the extent that such transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee, and such transfer was--

(A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or

(B) made according to ordinary business terms;

(3) that creates a security interest in property acquired by the debtor--

(A) to the extent such security interest secures new value that was--

(i) given at or after the signing of a security agreement that contains a description of such property as collateral;

(ii) given by or on behalf of the secured party under such agreement;

(iii) given to enable the debtor to acquire such property; and

(iv) in fact used by the debtor to acquire such property; and

(B) that is perfected on or before 30 days after the debtor receives possession of such property;

[joyoflivin]

I don't really understand what all of that means.
We have decided just to keep the first car. It seems like to much trouble.
JL

[LadyInTheRed]

Even if it doesn't feel right, that is BK law.

This is the way the law sees it:
- You borrowed $10k from Bank XYZ
- You bought a car worth $10K

I stand corrected. Thank you.

I do think that dealers are usually going to get the paperwork filed pretty quickly. It wouldn't be on the top of my list of concerns.

[LadyInTheRed]

I don't really understand what all of that means.
We have decided just to keep the first car. It seems like to much trouble.
JL

Don't let all of this discussion discourage you. I think you had a good plan to avoid the cross-collateral problem. Talk to your attorney before ruling it out. That's what he's there for.

[GWBcasualty]

I stand corrected. Thank you.

I do think that dealers are usually going to get the paperwork filed pretty quickly. It wouldn't be on the top of my list of concerns.

"I do think that dealers usually get the paperwork filed pretty quickly????"

WTF is that supposed to mean???
She can buy the car and finance it, but BEFORE filing she better check that the lien has been perfected within 30 days or otherwise SHE HAS TO WAIT AT LEAST 90 DAYS BEFORE FILING or lose the car.

What is so complicated about this??

It has nothing to do with the way "one feels" or the way "it should be" or the way "one thinks". She needs to know what to look for so that she is not going to get ***ed. It's not about making her feel good.
Yes. Chances are the paperwork will be filed within 30 days... but she needs to know what to do in case it's not.

Here it took me 20 seconds to find a ruling by a court on this... you can certainly find many others.

http://www.arb.uscourts.gov/orders-rules-opinions/opinions/evans/shelby.pdf

[LadyInTheRed]

"I do think that dealers usually get the paperwork filed pretty quickly????"

WTF is that supposed to mean???
She can buy the car and finance it, but BEFORE filing she better check that the lien has been perfected within 30 days or otherwise SHE HAS TO WAIT AT LEAST 90 DAYS BEFORE FILING or lose the car.

What is so complicated about this??

It has nothing to do with the way "one feels" or the way "it should be" or the way "one thinks". She needs to know what to look for so that she is not going to get ***ed. It's not about making her feel good.
Yes. Chances are the paperwork will be filed within 30 days... but she needs to know what to do in case it's not.

Here it took me 20 seconds to find a ruling by a court on this... you can certainly find many others.

http://www.arb.uscourts.gov/orders-r...ans/shelby.pdf

That case has nothing to do with preference and the debtor did not lose the car (at least not as a result of that decision). The lender's claim as a secured creditor was denied because the lien wasn't perfected because the debtor did not file the lien as agreed.

If the dealer is filing the paperwork, it usually gets done quickly. If the buyer is suppose to file it, than the buyer will know whether the lien is perfected.

Note, I again use the word "usually". I never said it doesn't happen and I didn't suggest the OP not make sure the lien is perfected. But, if it were me, I'd be more concerned about the cross-collateral issue with the current car than about the risk of a lien on the new car not being perfected within 30 days.

WTF is that supposed to mean???

I expressed my opinion on what my relative level of concern would be. You are free to disagree, but there is no need to curse.