New Car purchasing before filing

[Snakeeyes9]

Long time lurker, first time poster...

My wife and I are jointly filing and have already met with 2 attorneys. Currently, I own a 2012 Mazda 3 with 55k mileage, 95% of that is highway miles from the work commute. I owe 16K on it. My wife has a paid off 2008 Subaru with 100K miles. Obviously, one of the biggest concerns is how long my wife's vehicle will last into the bankruptcy, and our ability to get a car loan if her vehicle needs to be replaced. Our FICO are still relatively decent enough to get a good loan rate.

So, the first attorney says, in not so many words, that it would be in our best interest to get a newer vehicle to replace my wife's car. He said that he has had clients get car loans a couple of years after chapter 7, but the interest rates were extrememly high. He told me not to worry about my vehicle, despite the fact I never even thought about replacing my car. I was told that the purchase could delay filing for upwards of 90 days.

The second attorney told us to replace both cars, but keep the loans in the $300-400 range for each. I was a bit taken back by his recommendation. Again my car is 2.5 years old and I am not looking at getting rid of it. Is it common, or for that matter in our best interest, to replace both vehicles before filing? Won't a trustee and the judge have a major issue with that? The attorney said the loans would benefit us in the deductions portion to meet the median? We are roughly within $1000 over the median fo the household.

Any input would be greatly appreciated...

[Greysky]

Are you able to pass the means test? We were right at the borderline and our Lawyer suggested buying a new car to give us more expenses.

[keepsmiling]

A good idea and happens more often than you'd think. You have spoken to some good attys!
Seems contrary to common sense but many things in BK are
Oh and WELCOME to the forum.

[Snakeeyes9]

Are you able to pass the means test? We were right at the borderline and our Lawyer suggested buying a new car to give us more expenses.

Right now we are over the median by roughly $1000 for a household of 3 in the state of PA. I fully understand the rationale of getting my wife a new car, bit I feel adding a second new vehicle could potentially be looked at poorly by the court. Also, we are basically looking at a base model Subaru Legacy, which with her trade comes to 18k, payments of $320-340 ish. I am paying $360 for a 2012 Mazda. I was looking at a base 2014 for $20k, payments would be about the same.

[keepmine]

The median income has nothing to do with schedule j expenses.
Have either lawyer filled out schedules I and J to determine your monthly disposable income ? This is what you need to get focused on. It's not unusual to have an over the median filer get a Chapter 7 discharge because, their expenses are high enough that there isn't any disposable income left to fund a 13.

[Snakeeyes9]

The median income has nothing to do with schedule j expenses.
Have either lawyer filled out schedules I and J to determine your monthly disposable income ? This is what you need to get focused on. It's not unusual to have an over the median filer get a Chapter 7 discharge because, their expenses are high enough that there isn't any disposable income left to fund a 13.

Nope, we did a basic 15-20 minute meeting by phone where both attorneys did a brief rundown of monthly income, expenses, etc. I was told by both that it may be close. We asked both about replacing the wife's car and were encouraged by both attorneys to proceed with the purchase. My main question is should we really be making 2 new car purchases and then filing as that is what was recommended by the second lawyer. It feels fraudulent, but then again I am not an attorney.

[LadyInTheRed]

People buy cars before filing BK all of the time. I have yet to hear of it causing a problem. I bought one a month before filing a Chap 13. I was concerned the unsecured creditors would complain because it greatly reduced what they get paid. My attorney thought I was cute for being so concerned about the unsecured creditors.

Make sure that you can afford the payments on the cars you purchase. You don't want to bet a Chap 7 discharge and then be stuck with car payments you can't afford.

Do you know what your state's vehicle exemption is? Be careful about the trade-in. You don't want to end up with non-exempt equity in either car, especially if you are able to qualify for a Chap 7.

[justbroke]

People have purchased vehicles within weeks (think 2-8 weeks) of filing! It's nothing secret if you are going to follow through and keep the vehicle. The reason to purchase new when you are a borderline Chapter 7, is just in case you need to convert to a Chapter 13. That way, you have cars that will last the entire 5 years (at least in theory they should), and you should be able to avoid any major mechanical headaches not covered by base or extended warranties.

Very smart attorneys.

[Snakeeyes9]

Thanks for the feedback ladies and gentlemen. You have put my mind at ease.

[Snakeeyes9]

Just wanted to update the thread.

We finally retained an attorney and stopped paying dischargable debt last week. I already have some of the creditors calling as I have never missed a payment on those accounts. The money I saved by not paying has gone towards the attorney.

We got a new vehichle for my wife. She traded in her 2008 Subaru for a 2015 Subaru Legacy. With the trade in, the cost of a base Legacy was $18889. Of course the dealer pulled Trans Union for credit check, which has always been the lowest of the three FICOs and we were offered a 6.9% rate. After the dealer tried to sell us an array of things that we declined, miraculously the rated came down to 4.9 and we were able to afford an extended warranty. Her car payment is $328.

As for my vehicle, the attorney recommended that I also get a newer vehicle. My grandmother wants to give me monetary gift as a down payment, or to off set the carry over from my existing car loan. I was offered 12K for trade, I owe 16K. With some haggling I am trying to get them to either come down on price of the new car or to give me more on the trade.

Will the gift from my grandmother effect the filing process? We intend to file within 90 days. Will I need some sort of document signed that the money was a gift for a car down payment?