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Pre-Filing, How much down payment can I put on a car?

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    #1

    Pre-Filing, How much down payment can I put on a car?

    Hello, I am foreclosing on my house and expect to have to file chapter 7 in 7-10 months. We are in need of buying a car now and we would reaffirm it when the time comes.

    My question is- Is there a limit on the amount of down payment I can put on the car? (we would like to put 50% down if we can) Can the bankruptcy trustee say that I was trying to use up savings that should have gone to paying off debts?

    I have tried to call 2 attorneys and nobody is getting back to me so please any help would be appreciated!!
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    #2
    You should be OK past six months. Usually keeping spending down under $600 within 180 days may be looked at. Are you thinking NEW or a good used car. Don't do fancy and remember a bk7 is a liquidation so make sure the car is less than the exemption in IL. Anything over could be sold for the equity. However not usual with an unpaid balance on it but it "could" be taken. I play it safe and honest, that will make your bk easy. I suggest though, a good used car. That is your choice as new car sales are not doing well, make sure you get a good deal. 'Hub
    If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.

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      #3
      thankyou, If I bought new wouldnt I be able to just reaffirm the car loan though? our exemption in IL is $1400. cant do alot with that.

      Comment

        #4
        Originally posted by IllinoisLiz View Post
        thankyou, If I bought new wouldnt I be able to just reaffirm the car loan though? our exemption in IL is $1400. cant do alot with that.
        Yes you could. Of course you could ride through and indicate this on your bk paperwork. That is traditionally safer if your job/s take a crash. I would be careful to throw half into a down payment though, that would be roughly 7K on an average sized car. What kind are you considering. A Caddy or BMW might just lead the Trustee to do further work as 'Fraud" has no length in a look back period. It could red flag you. It would be better to put your savings into an IRA or the likes. I realize you also wish to preserve your savings but you are tipping on a narrow edge of doubt with any Trustee. They have seen it all, and dumb ole' me sees this, he could.

        I am sure you will get more opinions here soon. 'Hub

        BTW, Welcome to our family. Read all the C7 stickies and car buying info. Get the C7 book from Nolo press. Worth it's weight in exemptions.
        If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.

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          #5
          If you only have $1400 auto exemption in IL - you might not want to put too much down. The more money you pay on it now, the more equity you'll have.
          ~Staci
          Not an attorney, and never played one on tv. My responses are based on my own experiences & personal opinions.)

          Comment

            #6
            Originally posted by SMinGA2 View Post
            If you only have $1400 auto exemption in IL - you might not want to put too much down. The more money you pay on it now, the more equity you'll have.
            Exactly, however in 2008 we got our discharge. We had a 2004 Jetta though with only a few months payment to make to pay it off. It was not taken but I also reaffirmed it just due to owing so little. It depends on the Trustee. What are you driving now? A car is an essential and mostly not a luxury item. Just realize a fancy-dancy one will bring on questions and the transfer of funds to the down payment. Once you file, the Trustee has great power and could recover that down payment from your dealer in which you would lose it all. This seems simple but you must consult a bk lawyer in IL as to what policies they have. Every Court and every Trustee is different. 'Hub
            If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.

            Comment

              #7
              thanks for that addl info. No Bmw for us here! were just looking at a Kia! We only have a 2004 Honda Civic right now so another car truely is a need.

              Comment

                #8
                'Hub, could you give reference to bankruptcy code where a trustee can take a down payment back for a vehicle? I think you may be wrong on this one. They can take funds back from unsecured, to evenly distribute to all unsecured creditors. The car financing is secured by the lien on the title so that makes it a different situation.

                The problem with a low state exemption and a vehicle that has non-exempt equity: The trustee can take the car, sell it, pay off the loan & give Liz her $1400 exemption. The rest goes to pay creditors. Will the trustee do that? I don't know, but it is a possibility. Even though transportation is a necessity, the state has an exemption of $1400 so IL deems a more valuable car (in terms of equity) NOT a necessity. Of course the more likely outcome is Liz makes an offer to the trustee, and pays the trustee over time. Such as if there is $5000 non-exempt equity in the car, Liz could probably offer $3500-4000 to 'buy out' the non-exempt portion.

                If buying new, its not as much of an issue - because the new car will lose some of its value immediately. Buying used, unless you're driving an excessive # of miles, the value shouldn't drop too much in a few months.
                ~Staci
                Not an attorney, and never played one on tv. My responses are based on my own experiences & personal opinions.)

                Comment

                  #9
                  According to: https://www.legalconsumer.com/bankru...-law.php?ST=IL

                  Illinois has a $2,400 vehicle exemption.

                  They have an unlimited exemption for clothing, Bible, schoolbooks and family pictures as well as for health aids.
                  They have NO exemption for furniture, household goods, appliances, etc.
                  They have a $1500 Tools of the Trade exemption for implements, books, and tools of the trade.

                  They *do* have a $4,000 Wild Card that can be used to cover anything except wages.

                  So hopefully the OP can use ~$2k for their household contents and use the remaining amount of the Wild Card on their vehicles' exemption. This means they could put around $4,400 as a down payment on their vehicle and have it fully exempt from the Trustee.

                  Of course, only a local BK attorney knows what will fly in their neck of the woods - so it is a smart idea to check with them!

                  ETA: Since there is no wage exemption, timing the day of filing so that you have the least amount of earned but unpaid wages will be something to be sure to ask your attorney about!
                  ~~ Filed Over Median Income Chapter 7: 12/17/2010 ~~ 341 Held: 1/12/2011 ~~ Discharged: 03/16/2011 ~~
                  Not an attorney - just an opinionated woman.

                  Comment

                    #10
                    wow..this is far more complicated than I thought it would be!! Do you know if I'm positively able to reaffirm the car loan? If so wouldnt that cancel out the above scenario? sorry this was responding to SMinGA2

                    Comment

                      #11
                      Seeking local council is of course the right move before making any final decision.
                      The OP remarked about a $1400 vehicle exemption, and I just looked on various websites and found some saying $1200 and LEgalConsumer listing $2400.

                      IllinoisLiz, you said you tried calling some attorneys to ask this question and got nowhere. You may want to schedule a free consultation or two - you'll be more likely to get some answers specific to your situation that way.

                      Originally posted by ValleYum View Post
                      According to: https://www.legalconsumer.com/bankru...-law.php?ST=IL

                      Illinois has a $2,400 vehicle exemption.
                      ...

                      Of course, only a local BK attorney knows what will fly in their neck of the woods - so it is a smart idea to check with them!
                      ~Staci
                      Not an attorney, and never played one on tv. My responses are based on my own experiences & personal opinions.)

                      Comment

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