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Car sale/purchase before bankruptcy

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    Car sale/purchase before bankruptcy

    Question: I sold my car for $4,500 greater than the loan. I'm buying a used car as soon as the check for the old one clears and I can pay off the note on the first car. For means test purposes, is that $4,500 considered income? Would I have been better off to trade the car so that the money never crossed my bank account? Can I use some of the $ to pay bills and the rest as a downpayment on a used car? Help! That would screw me over big time!
    Filed 1/31/11 341 3/2/11 Waiting for discharge........

    #2
    Hi Jacey,

    Congrats on the successful car sale! Definitely roll the profit back into a car and living expenses before you file.

    As to the means test, courts have been holding that a one-time payment can't force you into a Ch 13 or dismissal if Schedule I (post-BK income) minus Schedule J don't show positive monthly money for post BK life. The most famous case is In re: Lanning that was decided by the Supreme Court. In re: Smith out of NC also agreed

    One-time payment = fail the means-test = UST moves to dismiss = 'absurd result,' trustee needs to look at 'totality of circumstances' = motion to dismiss/convert denied

    You should be OK, hope you find a nice low-mileage, high mpg car to carry you through your BK!!

    Tom in Colo
    Ch7 filed 5/12/2010.....341 meeting 6/30/2010....report of no distribution 8/15/2010.....discharged 10/01/2010.....closed 11/09/2010

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      #3
      Thank you! My attorney wasn't sure, and it scared me. I would have traded the car and avoided handling the cash if I had thought about it in advance, so I broke out in a sweat yesterday when he said I had possibly screwed up. Yipes! I like to be warned before I do something stupid, not after!
      Filed 1/31/11 341 3/2/11 Waiting for discharge........

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