Preplanning Car Equity

[justbeach03]

In Florida & trying to figure best way to NOT lose equity in car or reduce monthly payment by getting a new car. Preplanning married, filing single, non-consumer Ch7 in May 2011. I have a 2007 Mazda and owe $6500 ($600 mth payment) with KBB value of $12,500 = $6000 equity.

If I keep making payments it will be paid off by filing date, but will need 4 tires and be over 50K miles. I assume I would need to pay more to keep it or surrender! I just don't see the benefit in that, as I will need to have a large vehicle due to increase in family size by May 2011.

I had 2 thoughts that I would like to run past the forum for advice:

1. Trade-in now for larger vehicle and use equity. By next year the KBB
value will have depreciated and equity should be 0. But husband will have
to have title and the loan, as my credit is already shot.
2. Save $600 mthly by not make payments (use for necessities)- surrender
car in the next few months & Trade in husband's car for larger vehicle
and keep loan and car in his name. That won't fall under my BK.
3. Keep makin payments-see what the Trustee says @341.

What do you think-or do you have any other creative suggestions?

[SMinGA]

For option #2 you would lose your equity if you stop paying & surrender the vehicle. Lien holder will sell it at auction which tends to bring in very little.

The only problem I see with #1 is it might be considered a transfer of property.

[justbeach03]

I'm afraid I will lose equity anyway and be paying $600 for the next year-with nothing to show at the end. What if I personally sold it...paid the bank and took that money to pay for new car, with husbands car as trade in? obviously the new car would still need to be in his name, since I can't get credit.

[Skinsfan]

In Florida & trying to figure best way to NOT lose equity in car or reduce monthly payment by getting a new car. Preplanning married, filing single, non-consumer Ch7 in May 2011. I have a 2007 Mazda and owe $6500 ($600 mth payment) with KBB value of $12,500 = $6000 equity.

If I keep making payments it will be paid off by filing date, but will need 4 tires and be over 50K miles. I assume I would need to pay more to keep it or surrender! I just don't see the benefit in that, as I will need to have a large vehicle due to increase in family size by May 2011.

I had 2 thoughts that I would like to run past the forum for advice:

1. Trade-in now for larger vehicle and use equity. By next year the KBB
value will have depreciated and equity should be 0. But husband will have
to have title and the loan, as my credit is already shot.
2. Save $600 mthly by not make payments (use for necessities)- surrender
car in the next few months & Trade in husband's car for larger vehicle
and keep loan and car in his name. That won't fall under my BK.
3. Keep makin payments-see what the Trustee says @341.

What do you think-or do you have any other creative suggestions?

I can't help. I can only let you know I'm wrestling with the same issue. See my thread just below yours.

I can get $6,000 for my car at trade-in. However KBB and NADA have my car from $8,000 (trade-in) to $15,000 (retail). Ridiculous.

I've read they may average trade-in and retail, giving me $11-12,000 w/ only a $2,000 exemption. I'M NOT GOING TO BUY MY CAR FROM THE TRUSTEE FOR $10,000!!!

My credit is okay, so I believe I can buy or lease at decent rates.

[river147]

equity in car

I'm in the same scenario. I had about $14k equity in my car because it was paid off in my name only. My husband is not filing chapter 7 with me so my attorney advised me to sell the car outright for cash and buy me a newer car.
I was offered 12k for the car and I took it. Take what your state allows on vehicle exemption (ours is 3K) and put no more than 3k down on newer vehicle. The rest of the cash I can use to pay sales tax, home repairs, tires for my husband's vehicle etc... I will also use a big chunk of it to pay my real estate taxes, and get caught up on utilities and mortgage payments and pay legal fees. It doesn't take long to show where 12k was spent as long as I have receipts to document it.
The problem is that I can't get new car on my own, so my new car will be financed only by my husband and his name only on the loan. If the trustee questions it, I only put 3k down which was the exemption allowed in my state.
Don't see how this could be a transfer of property. Just don't know how long I have to wait after purchasing the new vehicle before I actually file. Some people say 6 months some say a year. Does anybody know the answer to this?

[justbeach03]

river- just wated to see what/if you found out about the waiting time between purchase and filing. I did exactly what you recommended. Sold the car, am using the money $1000 down and putting husbands name on loan and title. Good suggestion!

[CommonSense]

For option #2 you would lose your equity if you stop paying & surrender the vehicle. Lien holder will sell it at auction which tends to bring in very little.

The only problem I see with #1 is it might be considered a transfer of property.

I thought the main sticking point in transfers was to flush out hidden transfers to relatives or people you know that are designed to hide assets that you can then get back easily and recoupe said funds.

I would run the ideas past a attorney that know's how the trustee operates and makes decision's.