Question about Texas chapter 13

[alaska708]

Have a few questions, was discharged under a Texas chapter 7 back in 8/2018, can’t file a new case until 8/22 and am planning to file for a 13, no other choice.

Question is this, I took out a loan with my vehicle title about 7 months ago, is an older car and now having issues keeping it running. Can I just stop paying on this car loan, return the car to the lien holder and go out and buy a new car with financing before my credit turns south?

I have no other choice as I can’t afford to pay $400 on this loan my older car is under and afford to buy a new car, one that doesn’t have mechanical problems. I just want to return to lien holder and buy a new one months before a new ch 7 and use that payment in my plan.

Also if Im married in Texas and only make around $70,000 per year how will my payment be structured if I don’t have a lot of excess income after rent, car payment, food, etc?

Any input will help. In a bad situation here, Covid definitely hasn’t helped. It’s ridiculous there are no new bk laws in being able to file for a ch 7 under 8 years due to this pandemic.

[bcohen]

You don't say what is wrong with the car, what kind of car this is, or how much the repairs will cost. Assuming for the sake of argument that the car is completely worthless, value is less than $2k in good condition, has a blown engine or transmission, you can certainly stop paying but the odds are good that the lienholder won't bother to collect the collateral. So you will be stuck with an inoperable car which you can't sell, give away, or even junk due to the lien on the title.

It also is questionable as to whether or not taking on a huge debt to purchase another vehicle really makes sense. One must always pay attention to the total cost, and not just the monthly payment, and decide if the item being purchased is really worth the price being charged. Do not fall into the trap of taking out a loan with a stretched-out term to give the monthly payment you need, but based on a grossly-inflated purchase price. Then, you will be in the same predicament down the road (car needs major repairs, you can't afford to fix it) but you won't have the escape hatch of bankruptcy available.

[alaska708]

It’s a 2008 Toyota Corolla with a 125,000 miles. Lender gave me a $11,000 loan at $385 a month for 54 months. Car now literally falling apart and can’t afford to repair it or buy a new car and pay on both so am thinking about financing a brand new car, filing a ch 13 and just dropping the car under lien to the finance company. Bad situation.

[bcohen]

I assume the "lender" you are referring to is a payday/title loan, not the loan used to purchase this vehicle. I would say that a 2008 Corolla in good condition with 125,000 miles is worth about $6-9k dealer retail, so even if it was in perfect condition, it does not make sense to repay this loan for a total of $20,790. If the car is indeed "falling apart" then it certainly doesn't make sense to keep paying on this loan! That being said, I own a 2004 Corolla, which is basically the same car, and it has about 125,000 miles, and it is still reliable and in good condition.

You live in Texas, so your wages cannot be garnished. If this title loan is your only major debt, it might make sense to just stop paying and delay bankruptcy until the creditor files a lawsuit--which might not even happen. A lot of payday lenders/title loan lenders lack the proper licensing, and therefore cannot use the court system to collect their debts. Although car prices (new and used) are in a bubble right now, you can still finance a new or nearly-new vehicle with a loan payment of less than $385 per month. As always, it is important to make sure you are not overpaying for the vehicle, and do not fall into the trap of focusing solely on the monthly payment.

[alaska708]

I just want to finance a brand new car, stop paying on the Corolla and return to the lien holder. It’s through Mariner Finance, it’s a loan company but the interest rate is 29.99% and the car is maybe worth $2,500 as it has a lot of body damage on from a hail storm. I just want to buy the new car before I stop paying and my credit tanks.

[bcohen]

Mariner Finance...I remember receiving "pre-qualified" loan offers in the mail from these bottom-feeders after I declared bankruptcy. What was interesting about their loan offers was that they sent a check, which functioned as the promissory note for their usurious loan. The check was marked "for deposit only" so that way they'd have access to the borrower's bank account. I was absolutely floored by the fees and high interest they were charging. Obviously, I never accepted their "helpful" offers.

If the car is beat-up like you say, the odds are good that Mariner isn't going to bother to repossess it, even if you stop paying. It costs a lender about $1000 to repossess and auction off a vehicle, and something this old and in poor condition isn't going to sell for much more than that at auction. So be aware that you will have this car taking up space on your property, with no (legal) way to dispose of it due to the lien. (If the car still runs, you can of course continue to register and drive it.)

It sounds like your strategy makes sense. If you can secure a decent interest rate on a new (or nearly new) vehicle, while your credit is still decent, do it. Then stop paying on this personal loan, and see what if anything Mariner does. Be aware that like most payday lenders, they will attempt to withdraw payments from any bank account you have ever paid them from--even if you have revoked authorization for them to do this. Therefore, it is imperative that you open new account(s) at a different bank before you default on this loan.

[alaska708]

Can’t I just take the car to Mariner and hand them the keys? They technically own the vehicle.

[justbroke]

Can’t I just take the car to Mariner and hand them the keys? They technically own the vehicle.

Probably not. And be careful of that type of loan as you may have pledged other "personal" property as well.

[bcohen]

Can’t I just take the car to Mariner and hand them the keys? They technically own the vehicle.

Not exactly. The lender has a lien on the vehicle, but you are still the registered owner. They don't really want the car, especially if it's in poor condition. More importantly, Mariner (and other storefront lenders like it) does not own the building and land--they are leasing the space. The landlord will be contracted with a local towing company, and if you leave the vehicle there, it will be towed away as abandoned, and depending on the laws in your state, you may be hounded for towing and storage fees.

Here in Arizona, the state charges an "abandoned vehicle fee" of $500 on top of whatever towing and storage fees are incurred, and will suspend your driver's license and registration for every vehicle you own if this is not paid. Several other states have similar laws. Attempting to leave the vehicle at the lender's place of business without written permission from their manager could prove to be a costly mistake!

[alaska708]

Thanks for the information. No other property being held under this loan. If it gets to the point of the creditor unwilling to accept the car back they can tow it and I’ll name the towing company a creditor as well under the chapter 13.

[shipo]

Thanks for the information. No other property being held under this loan. If it gets to the point of the creditor unwilling to accept the car back they can tow it and I’ll name the towing company a creditor as well under the chapter 13.

I think you missed the bit about the state becoming involved with an abandoned vehicle charge; depending upon what the laws are like in Texas, you may regret making such a decision.

[flashoflight]

Given the ridiculous car prices and lack of inventory right now, I'd fix anything other than a blown motor or transmission. Also, you are a long, long way from doing another 7 as an escape hatch and I don't think you have the temperament to survive a 3-5 year chapter 13. You have to learn how to live on a super tight budget and how to live with no access to credit for 3-5 years. In theory, you could get a car loan during a 13 but sometimes it's not possible to do.

[shipo]

Given the ridiculous car prices and lack of inventory right now, I'd fix anything other than a blown motor or transmission. Also, you are a long, long way from doing another 7 as an escape hatch and I don't think you have the temperament to survive a 3-5 year chapter 13. You have to learn how to live on a super tight budget and how to live with no access to credit for 3-5 years. In theory, you could get a car loan during a 13 but sometimes it's not possible to do.

I would argue even a blown engine or transmission is worth repairing/replacing in today's car market; used motors and trannys are plentiful and inexpensive in a bone yard near you.