What should I do?

[Lookyzark]

Just found out I'm facing a significant change in income. I'm losing nearly $5k a month. I will be about $3k a month short on payments.

My car is a $75k truck. Should I try to trade it in before bankruptcy? There is no way I have any equity in the truck. Would it be better to include it in the bankruptcy and then have my wife finance a new car for me? Both of our current cars are in my name only.

I have a similar question about a boat. If i sell the boat, i dont think i would get the amount i owe. Should i just include it in the bankruptcy?

I have no experience with this. I don't really understand it yet.

[shipo]

Wow, tough call. How much are you underwater on both the truck and the boat?

[Lookyzark]

I'm not sure. The truck has 50k miles. It's a 2021. I bet I'm under about 10-15k at the most. The boat is probably 5k under.

[justbroke]

If you're going into a Chapter 13 and it's not a 100% Chapter 13, then you're going to have trouble keeping the boat. If your car payment is over $588/month... it won't be too acceptable by the Chapter 13 Trustee. If the re-amortization of the vehicle over 5 years comes out less that drops the monthly cost below the $588. There are ways to deal with that issue, but it will cost money out of the budget.

Remember, a Chapter 13 allows you to keep any property. But you must be able to afford that property, but not at the expense of unsecured creditors. That's why a person in a 100% Chapter 13 can keep anything that they can afford (after paying 100% to the unsecured creditors).

[Lookyzark]

I'm not wanting to keep the boat or the car. I was hoping to be able to keep it in the bankruptcy. I was thinking that would be easier for me than trying to trade it in or sell it.

[justbroke]

Reducing your expenses is always a good thing when you are or are near insolvency. Personally, if I could trade in a vehicle and get a different less expensive (dependable) vehicle, I would.

I was just mentioning that keeping the truck and boat would be difficult overall. However, and re-read what I wrote above re-amortization, you could possibly keep the truck. It would depend on whether your bought it more than 910 days ago (or refinanced it at least once). Through a bankruptcy tool known as bifurcation, a vehicle that is 910 days from purchase, or had been refinanced, could be crammed down to its actual value. Combine that with a 60-month (5 year) Chapter 13, and your payments could be much lower.

These types of strategies require a good attorney that can navigate this for you. I'll try to give an example. Let's say your $75K truck is worth $40K and you still owe $55K and paying $1,110/month. You've had it 2.6 years on a 7 year (84-month) loan. In a hypothetical Chapter 13, that vehicle would be stripped down to $40K secured with the balance of $15K being unsecured. You would pay the $40K over the 5 years of the bankruptcy at about 6.25%... but the issue with that is it's still over $600/month (it's about $775/month for 5 years).

Bottom line is that vehicle would be difficult to keep unless you have really low payments. If your payments are less than $600/month I would keep the truck.

[Lookyzark]

Got it. This stuff is confusing to me. I should probably meet with an attorney to see which is best.

[justbroke]

Got it. This stuff is confusing to me. I should probably meet with an attorney to see which is best.

Absolutely the best path forward. In fact, schedule a free consultation with 3-5 attorneys and pick the one that you like the most.