What about our cars??

[Foofy610]

We own 2 Pontiacs which have been paid off for years. They are 8 & 11 years old... both with high mileage. Looking forward over the next 5 years, we will surely have to consider replacing one or both.

How does that figure into our Schedule J? Is there any kind of allowance for buying vehicles?

[keepsmiling]

I'm in the same boat, but mine are even older. I don't think there is allowance for this in a 7 but I sure would like to be proved wrong.
Be sure to check on what your exemptions are since they are paid off.
For a 13, you'd be urged to replace NOW.

[btbeme]

Here is how the upside-down crazy-straw logic of a Ch 7 works...

If your vehicles are paid in full, you need to have them come in under your exemption limit. If they are old, high miles, etc this is usually not a problem, but be sure to check your exemption limits. Get your value estimate from edmunds.com or bluebook.com.

Now...if you happened to buy or own something new(er), say, you have an $8000 loan on a vehicle worth $10,000, then you have a $2000 liability on it towards your exemption.

Also...if you have cars that are paid in full and do NOT come in under your exemption limits, you can always get a private or a title loan for the difference between the exemption and the value of the vehicle.

Another important point - having even a small loan on a vehicle allows you to use the vehicle deduction on your Means Test.

If this seems confusing, it is. Speak to an attorney about your options. But, bottom line, is that unless you have something pretty extreme sitting in your driveway, vehicles are pretty easy to manage in a Ch 7. Getting something new(er) is a LOT easier and somewhat more beneficial before you file Ch 7.

[momofthree]

I believe you have mentioned that you may have difficulty qualifying for a ch.7 due to excess dmi. If this is the case, it would be highly beneficial for you to finance a new car now. You can claim a payment up to IRS standard of $496/mo, but if you have a paid-in-full vehicle, you don't usually get to claim an ownership expense, just the operating expense. It seems ass-backwards to be "rewarded" for taking on new debt rather than being financially responsible and keeping paid off vehicles, but it is what it is....

IF you end up in a ch.13, you will really need to purchase new vehicles ahead of time, as trying to secure financing during a 13 is a complicated process...