Borrow against my car?

[brokeincmch]

Hello-

I'm new to this forum and I find it to be very comprehensive. Great resource.

I'm looking at filing a joint Chapter 7 petition o/a April 1st. I have no assets above the exemptions (except my car) and my household CMI is below the state median (NJ).

I do have a question about my car. Background:

I hold the title and I own the car free and clear of any liens. By the KBB, it is worth about $5,500. I was thinking of borrowing against it in order to reduce my equity to the exemption amount (using Federal exemptions in NJ). So I will be trying to borrow approx. $2,500 which will be secured by an ownership interest in my car. I need the money to make repairs to the car and to pay my atty for the BK filing. Obviously, I would reaffirm the loan during the case. From what I understand, having a payment would be helpful for schedule I-J purposes.

My question is (provided I could even get the loan) will doing this be a problem with the trustee and/or judge? My view is that I am putting up my car as collateral and I fully intend to pay it back which will be proven when I reaffirm. It's not like a cash advance or credit card purchase, so it should not be an issue, correct? Obviously, I have to make the payments or the car will be repossessed. Beyond that, am I missing something or do I have the concept wrong?

FYI...I got this idea reading Moran Law which is highly recommended by several posters on this forum.

Thanks and hope to hear from someone soon!

-brokeincmch

[tcreegan]

Hi brokeinmich,

Seen many posters change up vehicles right before a BK, doesn't seem to be a problem. You should document where the money went; repairs and BK attorney fee are certainly legit expenses.

Good luck w/ it,

Tom in Colo

ps: You probably already know this, but if you are using federal exemptions, do you have any unused homestead exemption? Unused homestead exemption can be used as a wildcard (up to ~10K anyhow)