Converting from Chapter 13 to Chapter 7 Auto Loan Question

[da242911]

Im currently under a Chapter 13 and have payroll deductions that are going towards paying off a car loan I have and discharging my credit card debt. The payments have become way to much and Im more interested now in just getting this stage in my life behind me. I had the idea to have my fiance take out a loan for what I owe on my car and it was approved at a very low interest rate. Its of course over a longer term but the payments then would be where we need them and I could put bankruptcy behind me. To avoid paying sales tax the bank is actually agreeing to let me be a cosigner on this new loan.

I then called my lawyer jsut to ask what I would do if I sold the car. I was informed that even If I did that the court system still expects me to pay the full term on my chapter 13. I asked then about refiling under chapter 7 and he said it could be done

BUT!! If I file chapter 7 now, bring in the papers showing that old loan paid off, are they going to consider my cosignment on this loan my debt and try to discharge it too? I dont want to hurt my fiances credit basically. Thank you for all the help in advance.

[tobee43]

oh, i don't know about that...in respect to what your atty is telling you if you convert your 13 to a 7...situations change...incomes decrease..etc...so when you signed that payment agreement it was based on what you had at the time.

i personally, think you should speak with another atty...as remember your 13 atty has money to loss with your situation changing...i would get a more objective view.

many people reaffirm their auto loans in a 7...while many do not. in as much as hurting your financial credit ....well, it's just unfortunately, unavoidable when filing any type of bk...one just stays on your credit report longer...however, it's, i'm certain, a matter of opinion, but both reflect as bk's on your credit report...car loans or not.

[da242911]

I should probably simplify or explain my question better. Im in a Chapter 13 wanting to convert it to a Chapter 7. I am cosigner on my girlfriends auto loan that she just took out less than a month ago. If I convert to a Chpt7 will that show up and force her to give back the vehicle or change the loan at all? Her credit is really good and paymnt will be made on time incase that matters. Thanks again for anyhelp

[tobee43]

I should probably simplify or explain my question better. Im in a Chapter 13 wanting to convert it to a Chapter 7. I am cosigner on my girlfriends auto loan that she just took out less than a month ago. If I convert to a Chpt7 will that show up and force her to give back the vehicle or change the loan at all? Her credit is really good and paymnt will be made on time incase that matters. Thanks again for anyhelp

if it's a co-signer situation, that may change things.

i know we co owned a piece of property....and that was a completely different story....i would really ask to see if there is some why legally you could get off the loan...although, i still think if you are the co signer and never have paid and can prove she makes all the payments...hopefully that should be enough...even in a 7.

after all....it's NOT your car...is it..i'm mean it's not registered in your name???...so i do believe there is a difference between a co-signer and a co-owner...

[Pandora]

Im currently under a Chapter 13 and have payroll deductions that are going towards paying off a car loan I have and discharging my credit card debt. The payments have become way to much and Im more interested now in just getting this stage in my life behind me. I had the idea to have my fiance take out a loan for what I owe on my car and it was approved at a very low interest rate. Its of course over a longer term but the payments then would be where we need them and I could put bankruptcy behind me. To avoid paying sales tax the bank is actually agreeing to let me be a cosigner on this new loan.

I then called my lawyer .......

I'm a little confused here - first you say above its your car and your fiance took out the loan - then in your other post you stated it was your fiance's car and you cosigned for her car? Is this your vehicle or hers?

Either way, the very first thing you should have done is called your Trustee....since you co-signed a loan. You have to get permission to do so as well as permission to pay off or sell anything that is included in your BK. You said your car and credit card debt is what your Ch. 13 plan consists of - how exactly do you think you're going to pay that vehicle off w/out the trustee knowing and if you convert... the Trustee possibly taking that vehicle and selling it, regardless if you dismiss your 13 and convert??

How long have you been in your plan? Why not just get rid of the car (give it back to the bank) and get a lower payment on another car? CH. 13 plans are modified all the time, and if the trustee agrees, it shouldnt be an issue.

ETA: If you are thinking of converting to a 7 - why did you do a 13 to begin with? You have to qualify for a 7 by either being under the median or negative DMI. You simply cant just "convert" just because you dont want to pay the payment unfortunately.

[da242911]

Sorry if Ive made this confusing. What Im trying to do it put the bankruptcy behind me. Im planning to start full time school soon and will be leaving a decent paying job for min income and with that drop in income it will be impossible for me to pay the $550 a month to the trustee for chapter 13. My fiance can get a loan at a good percent and get the payments down to about $280 which would be affordable. Why keep the car? Well because we like it, its covered under a warranty, and the last thing I need durring all this is a car that breaks down and leaves me with another bill. I guess you could say for peace of mind then.

I havnt done anything YET. My plan was originally to just sell her the car. Title it in her name and call it done. The down side to that is having to pay sales tax all over again. So since I have a good relationship with my bank they have agreed to let her take out the loan and to let me cosign and not jack up the interest rate. This way I wouldnt have to title it all over in her name and avoid paying the sales tax. My main concern is getting the month payment much lower. Nothing shady was intended. I guess I should have released all details here the first time lol.

[tcreegan]

Hi da242911,

...can we assume you aren't close to the end of your Ch 13 plan?

[da242911]

Hi da242911,

...can we assume you aren't close to the end of your Ch 13 plan?

Yes. Sorry this is all new to me. Ive been in it for a year and 3 months. Supposedly have 30 months left till discharged.

[tcreegan]

*$%#@) computer....sorry for the split post...

If you are under the Ch 13 plan, to sell/refinance the car would require the plan to modified..?

If you convert to a Ch 7, you get discharged and no obligation on the car loan. Fiance still is obligated for the full amount.

As long as the payments stay current her credit report will be fine. Under the new credit reporting laws, what you do can't change her credit report. (thats not to say it will get reported correctly, best to check and correct them if they screwed it up)

Congrats on going back to school, but stay away from student loans...they are just a modern form of indentured servitude...

Tom in Colo

[da242911]

Thanks Tom for the great reply. My lawyer pretty much said the same thing but he seemed more interested in the $500 it would take to convert to Ch7 lol. So this eases my worry some. I was scared I would end up with a loan with both our names for the car AND my chapter 13 pymnt of $550. That would just ruin both of us. And no student loans for me. Sadly took me 10 years to find out I could attend for free with a Pell Grant At least to get me started.