Buying a car pre-bankruptcy...help me not to screw this up!

[beyond]

I'm soooo close to filing, about 60 days...and my 1989 clunker is about to die on me.

I pass the mean's test, but my disposable income is over $117 on the Schedule J.

I need:

a) New wheels, and
b) To reduce my disposable income

Makes sense to purchase a car on installments, right? Well, I can't get a dealer loan with my shot credit, BUT my mom is willing to sell me her car valued at $5,000 on installment payments with $1,000 down. She'd transfer the title to me with her name listed as the lien holder, and we'd execute a contract stating the terms of the installment agreement ($166 per month for 3 years). When I file, I plan to indicate my intent to reaffirm the loan.

The equity I'd have in the vehicle would be less than my allowed exemption amount.

Question #1: Does the above scenario solve the problem? Or somehow create another?
1b):My mom is scared to death that the court will take her car if even to sell it to someone else. She really wants to keep it in the family. I don't see any reason they would take over my contract and give it to someone else. Do you?

Question #2: Alternatively, assuming my current car lives through the bankruptcy, could I project a vehicle payment on my Schedule J even if I don't have a vehicle loan yet but plan to secure one? Would this be a safer move?

Oy vey! Thanks a lot in advance!

[LadyInTheRed]

As long as you have exemptions available to cover the equity in the car and the lien is perfected before you file BK, there shouldn't be a risk of the trustee taking the car.

But, the trustee is going to look very closely at a loan from your mother. The loan should be very well documented. I would check with your attorney before buying the car and have him/her review the paperwork to make sure all the t's are crossed and the i's dotted. If you don't already have an attorney, consult with a few and put this on your list of questions.

Are you sure there is not another way to reduce your disposible income? Your current expenses may not be as high as they should be if you have been cutting out things while struggling to pay debt. Make sure you are including every reasonable expense you can.

Welcome to the board!

[beyond]

Thanks, LadyInTheRed. : ) I appreciate your reply.

I met with an attorney two weeks ago, and he told me to save my money and file myself because I had a clearly simple case (hardly any assets, income less than average). The car issue hadn't come up, though, during that meeting. He also told me to not even worry about having up to $250 disposable income left over on my Schedule J. : O But I *am* worried about that.

Basically, I'm listing every "allowable" expense on my Schedule J and still have "disposable income". It definitely costs me more than the allowed ~$300/mo. for transportation if I were able to factor in cost to keep my 1989 clunker running. I have a quote showing $1600 in repairs needed. I've considered increasing my monthly transportation cost on the Schedule J to reflect that $1600, but I don't know how that would fly...

(And...I stopped paying my debt almost two years ago. I know it sounds bad, but I just gave up because I knew there was no way out.)

[keepmine]

Keepmines rule #1. Never involve others in your financial problems/bk.
$117 disposable income won't throw you in a 13.
I'd document the increased maintence cost on the clunker and raise your maintence/repair numbers and if the car dies before discharge, just borrow Mom's car until the bk is concluded.
Since you have no lawyer, if mom screws up the pocedure for properly perfecting her lein. the trustee could absolutely snatch that car.

[mountanddo]

I don't know, I find it odd that an attorney would tell you to save your money and file yourself. Even if you have a simple bankruptcy. Just because your free consultation attorney is saying that your case is simple doesn't mean it's simple for you. With the car situation and you being worried about your disposable income I just wouldn't take any chances. No one else finds it funny an attorney would say save your money and don't hire me? I could of probably filed my chapter 13 by myself as all I had was $100 DMI and one used 1996 sunfire. My attorney never once suggested I file myself. Of course my chapter 13 fees are in my plan so it really didn't save me any money not hiring an attorney.

[btbeme]

Question #1: Does the above scenario solve the problem? Or somehow create another?
1b):My mom is scared to death that the court will take her car if even to sell it to someone else. She really wants to keep it in the family. I don't see any reason they would take over my contract and give it to someone else. Do you?

Question #2: Alternatively, assuming my current car lives through the bankruptcy, could I project a vehicle payment on my Schedule J even if I don't have a vehicle loan yet but plan to secure one? Would this be a safer move?

Oy vey! Thanks a lot in advance!

#1. You are allowed to buy a car from any source. Buying from an "insider" will draw extra scrutiny to make sure that it is at market value AND the loan is perfected. Market value is fairly simple - get 2-3 quotes on the value of the vehicle via Edmunds.com, Kelley Blue Book, and maybe a local CarMax dealership. Use the Private Party Average as your number for value. Document everything - condition, etc - with photos and/or a written valuation from a good source (CarMax is great). As for perfecting the lien - make sure you have signed and notarized Bill of Sale as well as loan conditions and a payment schedule. Get that to DMV as quickly as possible so Mom shows up on the title as a lien.

#1A - do the above and no worries. You may be asked to explain, but if you have all of your ducks in a row then the explanation will fly. Make your payments on time, using a check. Above all, be transparent on this.

#2. Yes, but that might actually get closer scrutiny than Option #1. And, with Option #1, you can take both the loan payment and the vehicle use/maintenance expenses on your filing.

Just be thorough and transparent.

[beyond]

Awesome! Thanks all for your responses.

mountanddo -- I thought it was odd too that the attorney didn't push his services on me. He only asked me to consider writing a Yelp review for him.

btbeme -- Thanks a lot. Your response is very helpful!

[AngelinaCat]

Pardon me, but what is a 'Yelp review'?

[LadyInTheRed]

http://www.yelp.com

A great source of consumer reviews for all kinds of things. I use it mostly for restaurants. But also have found a great body shop and plumber based on yelp reviews.

[mountanddo]

What kind of a review would you give him exactly? He didn't really do anything? LOL