My car value = $7.5k Virginia exemption $2k

[Skinsfan]

According to the Kelly Blue Book site, my car value is $7,500. The exemption in Virginia is only $2,000.

I'm considering filing Chapter 7 in the future, 3, 6, 9 months, not sure.

I'm not looking to break any laws. I'm looking for any creative ways to keep this $5,500.

For example, suppose I were to purchase a new Ford Taurus for $30k. And suppose it came to $33k with taxes, tags, and fees. Could I use my existing equity (trade-in) of $7,500 for a down payment. Then have a loan of $25,500 and perhaps the resale value of the Taurus is only $26k after I drive it off the lot - giving me only $500 in equity. Then reaffirm the loan in Chapter 7.

Too clever? Anyway to do this with a lease? Other suggestions welcome?

[AlmostAmos]

Are you using the retail value or trade-in? You COULD do the trade-in scenario providing you wait a bit before filing...

[SMinGA]

The trade in should not be a problem - except it might not be wise to start out your life after bankruptcy w/ a hefty new car payment.

[Skinsfan]

I'm using the 'trade-in' value and I'm using 'fair' condition, but I doubt a dealer would give me $7,500 for it.

It needs tires, brakes, starter, engine gaskets, and a new CV joint.

[AlmostAmos]

Rule 1 - take care of your transportation before filing. SO, if your car needs all of that work - get rid of it!

[Skinsfan]

SMinGA -

My example could extend to a used vehicle as well. Ideally, I would like to walk out of the dealership with about $2,000 in equity. But, the numbers don't work with smaller valued cars because I have $5,500 in excess equity that I would just as soon not give to the trustee.

What about a car lease?

This is probably way to clever, but when you take out a car lease, you allowed to put down extra money to get a lower lease payment.

Suppose the standard lease for a Taurus is $399/month. But, if I applied the entire $7,500 towards the lease, my payment may only be $250/month.

Or would the trustee read the lease looking for something like that?

[Skinsfan]

AlmostAmos -

That would seem very logical to me. Take care of transportation BEFORE you file. Seems like a trustee would understand that you will not be able to get credit after bankruptcy, so how could he/she be upset that you purchased reliable transportation before filing.

[SMinGA]

I don't remember the details, but a lease is different from a car loan. You're not building equity - so that part of it would not pose a problem I think. I believe it is counted as an expense rather than a secured debt. Still allowed, just not technically a loan.

I realize you could do the trade in a # of ways, just wanted to point out the obvious perhaps that its wise to plan for down the road. I'm sure there have been many situations where someone takes on a huge car payment and does not really think it thru. In some situations you may be able to get cash back on the trade in. Such as buying a $14k car, using $4k as downpayment and getting $3k cash back. Unless your district uses retail value, you would not have excess equity. After sales tax & fees, you might not even have $2k in equity if they DO use retail value.

My district DOES use retail NADA. Which stinks - because we'd be able to cram down hubby's vehicle if they considered what we could sell it for vs. what we could buy it for!

[Skinsfan]

Retail, yikes!

On Kelly Blue Book site, suggested retail price ASSUMES 'excellent' condition and my car has a value of $14,500. Wow!

So, theoretically I could look at $12,500 equity in my POS gas guzzling SUV with scratches galore.

[Skinsfan]

NADA site has my vehicle at $8,695 'rough trade-in' and $15,300 retail.

BTW, it's a 2002 BMW X5 4.4 w/ 115,000 miles.

[SMinGA]

I certainly don't agree w/ the NADA retail approach, unfortunately for my purpose (ch. 13 cramdown) my district's way of doing it is to look out for the creditor!

We owe $11,600. Average tradein (NADA) is $9,450 and retail (NADA) is $13,750. Its in good condition in terms of the major stuff, but seats have wear & tear damage and such. It does not meet the qualifications for 'clean tradein'. If we could use average tradein, we could repay thru our ch. 13 @ $9,450 and shave $2,000 off. Based on our district, we actually have equity. That does not create a problem - GA allows $3500 per spouse - but I know if we were to try and sell it we could not what we owe on it.

[Skinsfan]

Are you using the retail value or trade-in? You COULD do the trade-in scenario providing you wait a bit before filing...

Can you expand a little on the, "providing you wait a bit before filing.."

I know to stop using credit cards and limit cash advances, but what about a car purchase or lease?

BTW, I expect heavy scrutiny of my bk case by the trustee because of large IRA balances and the fact that I'm filing, "Married, not filing jointly, with declaration of separate households."

[SMinGA]

I assume AlmostAmos means its good to have a few months between major purchases - even necessary ones like reliable transportation.

I intend to buy a used Prius in a couple of months (the gas savings will almost make up for the car payment) and will ultimately file ch. 13. Atty has advised to allow at least 3 months between - but then in all likelihood I'll have a car loan with an astronomical rate get brought into the plan at my district's til rate of about 5-6%. So I think my atty's reasoning is allowing time to pass will make it harder for the lender to argue about the rate reduction.

Not sure if the same logic would matter for you, if you're filing ch. 7 and keep making payments as originally agreed.

[Pandora]

In VA - they usually average the private sale and retail sale price - and use that number; and it depends on what district you're in on what guide they use (NADA or KBB). Ours uses KBB or Edmunds (thank god).... actually we ran off all 3 of the price books (NADA, KBB and Edmunds) - and averaged them all out and provided them to the attorney ourselves. The Trustee didnt contest our valuation of our vehicles and used KBB, which was the higher than Edmunds, but poo-poo'd the idea of NADA, saying they overprice everything (thankfully).

I'm in the Western District.

[Skinsfan]

Thanks for that info.

Did your vehicle come in under the $2,000 exemption? If it was higher, say, $3,000, what did the trustee do? Ask you to surrender?