Buying New Car Prior to Filing

[ironman60]

My sister just bought a new car and then filed a 7 a few days later. I just found out that she filed (I wish that she had told me that she was considering bk because she was totally uneducated and only visited one attorney). Anyway, she says that her attorney told her to do so. She wouldn't be able to get a car after the bk. Really? She had a decent car but she says that she never felt safe driving around in it with her 3 kids. So, she needed something bigger (she got a large SUV). And, since she bought it new, she is way under on it. And, her payment is now $575! She says that she tried to buy a used car but the interest rate was going to be crazy high. So, the court would allow this?

[drowning123]

If she wants to keep the car, then she should keep the payments current. She can always reaffirm (renew the loan) with the bank. She doesn't have to surrender the car. It's OK, the court won't frown upon this.

[ironman60]

Is there a certain payment amount that she is allowed to have? And, being so upside down why would they let her keep it? When I did my bk I was told that I couldn't keep the cars because one was a lease and the other was way upside down. It didn't make sense for me to keep them anyway so I didn't press the issue with my attorney.

[drowning123]

Upside down doesn't mean the difference between purchase price and what it's worth now. It means the difference between Kelley Blue Book value and what you owe on the car. Your sister may very well not be upside down.

[doomed]

Sorry to hijack the thread, but I have a question related to this -- I'm upside down on my car by about $7k and my car note is $505/month. I'm handing it over to the bankruptcy. Would it look bad if I got a new car before the bankruptcy, as I'm not paying on the other one anymore? I have to have a car but the one I have now, I bought when times were much better and we made much more money and I can't afford it and it gets bad gas mileage and is a piece of crap.....

[62hotrod]

my lawyer told me to buy another vehicle before we file. the 1 car we owed on was through a credit union where i also owe 2 other accounts, and they wouldn't reaffirm on 1 loan only. i tried to get a small loan to payoff the loan but couldn't get that from a local bank. then i tried to do the" buy here pay here lots". they wanted $1000=2000 more than the value of the car plus 16-21% interest on the loans. so i ended up with a newer auto from a regular car dealer. had to pay a little more than wanted to and finance longer, but i should be able to afford it ok. we'll see what happens when we file.

[ironman60]

Doomed, I may be wrong but I think that you will not be able to get a car loan unless you trade-in your current car for the new one. I don't think that you can keep the old car , buy a new one and then give up your old one in bk.... in other words, the bank will not allow you to have two outstanding car loans. This happened to my dad. But, maybe if your credit is still good and you have a job it is possible.. just speculation

[tcreegan]

buy a car

Hello all,

The BK court will not approve a car loan w/ no equity and a large payment.

But....that doesn't stop you from staying current through the BK and keeping the car. (ride through)

But, think about it, why would the court not approve? Because it is not in the best interest of the debtor. ie: it is a dumb idea

Do NOT reaffirm, it is not required. The ride-through leaves you the option to get out of it when you need to.

Yes, you can dump one car in the BK and get another one. Many folks surrender the upside down gas guzzler in the BK and have bought a low-mileage gas friendly used car.

Problem with trading in a car w/ loan remaining on it is that loan amount gets put on the new car (amazing how far upside down this can get you). You don't need a trade-in, just a down payment.

A common scenario is folks stop paying debt payments, use the $$ for rebuilding their post-BK life. We stopped the car payments, used 4 months of those to buy a nice, low mileage, used car. We own it outright and spend about 1/2 of the old car payment for maintenance.

Good luck to all, the more I deal with automobiles, the better I like my bicycle....

Tom in Colo

[BKDebby]

I plan on filing next month. In June I had my first consultation with my lawyer, he told me to get rid of my 13 year old car (paid for of course) and buy a new one. So I did, I even got 0% financing so my payment on a brand-new Toyota is just $247/month. It's my only car and I plan on reaffirming it.

If you just do a ride-through on a loan, does that NOT help re-build your credit?

[tcreegan]

credit reporting

Hello all,

Hi BKdebby,

Lenders will quit reporting when they get the BK notice, it could be seen as violating the automatic stay. They also quit sending out statements and most stop online access.

After the BK case closes, request in writing that they start reporting again (reaffirmed or not) and sending statements (if you want them)

Also pull your credit reports and make sure all accts in the BK are notated "IIB" or "included in BK" with a zero balance. If you stay current on an account, write letters to the credit bureaus to have it changed to "paid as agreed" Be persistent, use letters.

Ask your lawyer b/c he/she will be aware of what has been happening in your district, but the general advice is to do the ride-through.

Good luck to you,

Tom in Colo

[dizzyblonde]

Hi BKDebby,
We are in the exact position you were in. We have hired an attorney and he says we should get a new vehicle before actually filing for bk (we need more monthly debt each month for chpt 7). We don't plan to file until Jan. But we stopped paying on our credit cards two months ago. We have never missed a house payment or an car loan payment in our lives. I'm assuming our credit is already bad due to stopping our credit card payments. I'm having a hard time finding anyone who will finance us. If you don't mind me asking who did you go through?

[wnguyen]

After the BK case closes, request in writing that they start reporting again (reaffirmed or not) and sending statements (if you want them)

Also pull your credit reports and make sure all accts in the BK are notated "IIB" or "included in BK" with a zero balance. If you stay current on an account, write letters to the credit bureaus to have it changed to "paid as agreed" Be persistent, use letters.
Tom in Colo

Really? I didn't know that. Thanks for this valuable info Tom.

[JoePlumber]

The biggest thing with reaffirming a auto loan after a discharge is if anything during the duration of the Loan term goes wrong, even a single payment being late they can take your car and take you to court for All losses and costs involved with their loss, and you can't avoid any of this since you just filed BK. They know they got you over a barrel for 7 to 10 years and your basically owned by their terms with No way out of it. Before you reaffirm you better know for Sure you can always make your payments on time every time.