Questions about a vehicle i wanna keep after dismissing or converting chapter 13

[moorman]

ok. im about 10 months into a 5 year chapter 13 plan. i have a vehicle in the plan. the problem is i no longer want to stay in the chapter 13, so im contemplating letting it get dismissed or converting to a chapter 7. the car's trade in value is between $2300 -$3000. i have two liens on it, one for 2600 and another one for 1900, for a total of $4500. its two seperate lienholders. the car also needs about $800 in repairs, which SHOULD place it on the low end of the value i posted above.

i have a family member who will give me some money to try and keep the car.

questions:

1. i believe the trustee's use the trade in value, which in this case would be between $2300- $3,000.

2. if i convert to a chapter 7, i understand that i can either reaffirm the debt ( no go), or redeem the vehicle for trade in value.( assuming the trustee uses the trade in value). if im able to redeem, i pretty much would be asking the trustee to let me redeem it for $2300 to $3,000.

3. the problem with converting is i owe the attorney a boat load of money since the case is still fairly new, and they will want to be paid before they convert the case. i cant pay them to convert AND come up with the redemption price.

4. if im not able to convert and if im correct in assuming i owe more than what the car is worth, if i let the case get dismissed, would the lienholders be more willing to negotiate a settlement offer?

so, with all i said, what would be my best option? i know this is mostly opinions because no one can predict what a creditor or trustee will do or not do.
the opinions i get will help me to determine whether to try and keep the vehicle OR take the money i get and just get another used vehicle.

[LadyInTheRed]

I moved your post to the Chap 7 forum because your question is mostly about redemption.

I do not know a lot about redemption, but I don't think you are correct that trade in value is the value that should be used. Retail value is more likely. The trustee will not care what value is used. The redemption is a matter between you and the creditor. If you disagree about the value, the judge would decide.

As far as paying your attorney to convert, depending on how high your plan payment is and how quickly the trustee is likely to petition to dismiss your case, you could stop making your plan payments and save them to pay your attorney. This is something you should discuss with your attorney.

I have not read of people having a lot of luck settling car loans that are not discharged. But, if the loan is in default, you might get them to let you catch up on payments after your case is dismissed. You never know what the bank will agree to until you try. If they won't settle or work out a payment agreement, then they might sue for a deficiency judgement. That process may take long enough to allow you time to save attorney fees to file a Chap 7. Depending on the market value of your car, you might be better off letting them repossess your car and replacing it. But, if the market value isn't less than what you owe, you could just keep paying. It's a hard to make a suggestion either way without knowing the actual market value and without knowing your overall financial situation.

[moorman]

I moved your post to the Chap 7 forum because your question is mostly about redemption.

I do not know a lot about redemption, but I don't think you are incorrect that trade in value is the value that should be used. Retail value is more likely. The trustee will not care what value is used. The redemption is a matter between you and the creditor. If you disagree about the value, the judge would decide.

As far as paying your attorney to convert, depending on how high your plan payment is and how quickly the trustee is likely to petition to dismiss your case, you could stop making your plan payments and save them to pay your attorney. This is something you should discuss with your attorney.

I have not read of people having a lot of luck settling car loans that are not discharged. But, if the loan is in default, you might get them to let you catch up on payments after your case is dismissed. You never know what the bank will agree to until you try. If they won't settle or work out a payment agreement, then they might sue for a deficiency judgement. That process may take long enough to allow you time to save attorney fees to file a Chap 7. Depending on the market value of your car, you might be better off letting them repossess your car and replacing it. But, if the market value isn't less than what you owe, you could just keep paying. It's a hard to make a suggestion either way without knowing the actual market value and without knowing your overall financial situation.

you are thinking along the lines of what ive researched and found to be true. there is RED TAPE and variables in trying a redemption or hoping for a settlement. also, once the case is dismissed, one or both of the creditors might have a tow truck in my yard the next day regardless of my intent. i think what im gonna do, since i cant pay my attorney to convert ( believe it or not, i owe the attorney MORE than any other creditor. i originally filed to get a large unsecured judgment done away with). for that reason, i had initially asked them if they could somehow rework my plan for 36 months instead of 60 months. thats my whole issue, being tied to the plan for 60 months, but that was a no go with my attorney.

so, i think what im gonna do is save up my money and let them have the vehicle. get another vehicle and save up to pay another attorney to do a chapter 7 on everything down the road or i just might research how to convert the case myself..the motor vehicle exemption in georgia is $5,000. so, as long as i purchase a car less than that amount, i should be fine if have to file a chapter 7 later.

[BKAttyMI]

FYI: Your attorney will need to be removed from the case and you will have to be "pro se" prior to you doing anything on the case yourself without your attorney. A motion will likely need to be filed and you will need to appear in front of the Judge. It will be difficult explaining that you don't want your attorney on the case any longer because you don't want to pay them. Note that some of those fees may be considered post-petition debt and may be non-dischargeable in a conversion.

[catleg]

wow. why were you in ch13 to begin with ?
taxes, keep your house, or high income?

[moorman]

wow. why were you in ch13 to begin with ?
taxes, keep your house, or high income?

keeping a vehicle and a large judgment. ( i have a large judgment against me that got avoided by filing the chapter 13. now it will not show as a judgment against me.) other than that, it was all small stuff.

[despritfreya]

Assuming you “qualify” for a Chapter 7:

1. Nothing in the bk code requires you to pay your attny, outside the confines of the plan payments tendered to the trustee for the Chapter 13. Every attny I know has a provision in the fee agreement that allows for the payment of fees in an unconfirmed case through an assignment of the plan payments if the case is dismissed or converted. However, such is not necessary. 11 USC 1326(a)(2) specifically provides for payment by the 13 trustee of allowed administrative expenses (including debtor’s counsel’s legal fees) out of the plan payments before funds are returned to the debtor if the plan is not confirmed. If the plan is confirmed the trustee makes payments pursuant to the order confirming. Of course, in either instance, payments are made to the extent possible based upon the funds held by the trustee.

2. To the extent that there are insufficient funds being held by the 13 Trustee to pay the allowed administrative claims, the balance owed to those claimants (including debtor’s attny) is rolled into the conversion to the 7 and will be subject to the discharge.

3. If your attny is not willing to represent you in the conversion you can “fire” him/her and proceed pro se. Such may not be advisable but there is nothing in the bk code that precludes you from firing legal counsel and proceeding pro se. It would be interesting to find some jurisdiction that has a local rule that stands for the proposition that once represented - always represented unless the judge agrees otherwise regardless of the wishes of the debtor. If you really want to convert but your attny is not willing to file the Notice of Conversion, file it yourself. Once you do, you can bet your attny will file a Motion to Withdraw as Counsel of Record. (Been there - don't that.)

4. Upon conversion you can redeem the vehicle, assuming you have $$. Redemption value is based upon 11 USC 506(a)(2), which sets the value at the “replacement value” which means “the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time value is determined”. The time at which value is determined is “as of the date of the filing of the petition”. Of course, this is all subject to negotiating with the creditors for a "good deal".

If you allow your case to be dismissed:

Upon dismissal either lienholder can repo the vehicle. If the junior repos, the junior will have to deal with the senior (just like a home mortgage). Either way, sounds like the eventual sale of the vehicle will not produce enough to pay off both in full. To the extent not paid, the lienholder(s), along with any other creditor you have, will be free to try to collect.

Des.