What should I do about my cars?

[micahCT]

My wife and I are planning to file in the fall (ch7, pro se, in connecticut.) We currently have 2 cars, a 2011 Subaru and a 2010 Hyundai. We're upside down on both loans - especially the Hyundai since we had negative equity in our trade when we bought it. We really need to have 2 cars. My commute is 30+ minutes and she's a stay at home mom with a preschooler and an infant (well, the infant will be here coincidentally right before we file) and there's no public transportation near us.

1) Can we keep both cars if we reaffirm them? Since we owe more than each car is worth, does that mean that they fall under the exception amount even though there's 2 cars?

Honestly, I wouldn't mind surrendering the Hyundai since we owe so much more on it than its worth and the payments are really high. I have no problem driving a beater - if i could find one for the right price - but that leads to more questions...

2A) Can we reaffirm and keep our Subaru but surrender the Hyundai AND own another car (that presumably I would own outright but would have a value less than the exemption?)

2B) We pass the means test and I earn less than the median income in my state for a family of 4 but our Schedule J and I forms are going to be cutting it close. If I get rid of the Hyundai in bankruptcy, do I still list it as an auto loan on Schedule J? If I don't I'm concerned it may appear that I earn enough (on Schedule I) to cover all our expenses which of course is only true IF I file ch7 and surrender the car. Am I crazy, or is that something to worry about?

Thanks for any insight

[btbeme]

Others may chime in, but here is my very first thought...

If you are upside down on your vehicles, your reaffirmation is almost certainly going to be denied by the BK judge. With that in mind, I'd answer your questions thusly:

1. Probably not. The reaff is likely to get shot down. It would be up to the auto loan companies to decide whether to repo, but I would pretty much bet on that happening immediately after discharge.

2A. See #1 above. But if you do own a car outright (I'd suggest still carrying a loan on one, even a beater, because it helps you a couple of ways - reaffirm THAT loan) make sure it fits under the exemption.

2B. If you have a loan - any loan - on a car - any car - you can claim the loan expense as well as the auto exemption. That is why I recommend keeping a loan on any vehicle you have, even if it is a beater (or two beaters) you might otherwise buy outright. Just make sure they fit under the state or fed exemption.

My opinion? Ditch both cars, get reasonably affordable cars with smallish loans on them. Make sure the equity fits under your exemptions. Make sure the loans are perfected (they are recorded against the auto title AND you have made a payment or two on the loan). I suggest, if you do this, that you reaffirm the small loans on the cars.

[anderson238]

you can try and work it out with the lenders to reduce the balances to current values of the vehicles once you file. We also were in the same situation, we were about 10K upside down on our Hyundai, the month prior to filing we purchased a new car (if you still have good credit) we surrendered the Hyundai and I was able to get my loan balance reduced on my car. we Reaffirmed both cars, but both are now at great interest rates 2.9 & 3.49 and we actually owe what the cars are worth.
this doesn't work for everyone, please think it trough, research, and have a plan B.
Good Luck to you!

[SMinGA2]

Regarding J and expenses: be sure and account for the increased expenses for the new addition to the family. You'll buy more clothes, diapers, etc. Eventually more food, laundry supplies, and so on.

Many people report being able to get moderately decent financing after bankruptcy, should you keep the car for now. One possibility is to schedule your filing well. Skip 2 car payments and schedule your filing so that you file your ch. 7 at the end of your payment grace period. (Probably 10 days - so if your payment is due Sept 1st and you file October 10th, you're about 40 days late when you file.) At that point, there is a very low likelihood that your car will be repossessed before you file, and filing gives you the automatic stay. Save up your car payment $, assuming you can exempt the cash. In this scenario, filing Oct. 10th would have you discharged around January 10th. You would likely be able to drive the car thru then. And you'd then have 5 months of car payments saved (Sept, Oct, Nov, Dec, Jan) to use as a down payment.

If you've been current on your payment up til this point, you may even be able to contact them to request a deferrment of 1-2 months, to give you a chance to save up more $.

[ValleYum]

I agree with Staci and you likely can keep the vehicles through discharge - but the finance company can take them 45 days after your 341 (if you are late with your payments and if you did not reaffirm or redeem) and still be in compliance with the automatic stay.

[SMinGA2]

True, and its a good thing to be aware of. Though there is only about a 2 week window between then and discharge.

I agree with Staci and you likely can keep the vehicles through discharge - but the finance company can take them 45 days after your 341 (if you are late with your payments and if you did not reaffirm or redeem) and still be in compliance with the automatic stay.

[ValleYum]

LOL Staci - true and it probably is unlikely in that 2 week window but I just wanted to pass the info along since the OP is filing Pro Se.

Now off to the dentist for dental implant surgery. Blergh.