Buying a car?

[Chris66]

My car is a 2007 with 178k, on its last leg. I had my first consult with a lawyer yesterday who said I wouldnt qualify for chapter 7 due to my $76k salary.

So, if I found a car & financed it before I filed - would anything change? Would it change whether I qualified for 7 or 13? Would the trustee in my about to be filed 13 be like "nah, this girl playing" - which I am completely not trying to do! I just can't imagine this car making it 5 more years!

[justbroke]

I don't see any issues. In a Chapter 13, you just keep paying for the car (at the interest rate in your contract and for the term of your contract). So if you get a 7-year (84 month loan), that would exceed the 60-months of your Chapter 13. You would just pay it as normal.

A 60-month Chapter 13 requires a reliable vehicle. I would not enter into a Chapter 13 with a 15-year old car that had over 100K miles on it. In fact, many will strongly encourage a to-be Chapter 13 filer to go get a new car before filing. In some cases, the unsecured creditors are helping to finance your car (if you had disposable monthly income before the calculation of the car). That's an unknown benefit of a Chapter 13.

In a Chapter 7, you'd likely "discharge" the debt, but you'd just keep paying. In certain cases, a Chapter 7 might require you to "reaffirm" the debt, but you'd just keep paying.

I bought a new car 2 weeks before my Chapter 13.

[shipo]

Chris66, as I mentioned in a different thread, I didn't opt to buy a new car before my Chapter 13 and ended up paying dearly for that (poorly thought out) decision. If you search the threads here I'm sure you'll run across others who did as I did and suffered the consequences, calling Carmella, Barbisi, and Zombie13, y'all may have something to add to this thread.

[Chris66]

shipo & justbroke Thank you both, I think I've decided I do need to replace the car, I have a message into my attorney now.

will financing the car change my ability to file 7? Which is what I wanted in the first place but didnt qualify for.

[justbroke]

It will not likely change your ability to file a Chapter 7. However, it could help with your expenses in such a way that it allows you to qualify for a discharge under Chapter 7. The big thing with a Chapter 7 is your "disposable monthly income" (or DMI). I qualified for a Chapter 7 with significant income... but I had significant "allowed" expenses (a home and 2 cars).

I can't say for certain whether that would generate enough expense to reduce your DMI below the threshold. (Generally, it must be under about $250/month to qualify for Chapter 7.) But if you have the DMI anyhow, your unsecured creditors will literally pay for the car in a Chapter 13!

[Chris66]

Thanks justbroke, Really the only reason I was hoping to be able to qualify under chapter 7 was because I'm so nervous about the trustee piece in 13. The monitoring of every penny in/out of my checking account. Right now my lawyer has estimated my monthly payment to be $640 so it sounds like even buying a car won't change that a whole lot. I am divorced & don't own a home so I feel like that puts me at such a disadvantage. I'm also 57 & have nothing in retirement so my plan was to increase my 401 contributions tp 10% if I was able to discharge it all in chapter 7. Thanks for the info, now I wait to see when the lawyer responds to my question.

[Zombie13]

shipo Chris66 - justbroke - yeaaaaah, replace your car Chris66 LOL! JB described closely what one of our cars was: over 100K miles, 11 years old when we filed. As soon as we got out of the banrkuptcy we ditched it for a replacement.

[justbroke]

Thanks justbroke, Really the only reason I was hoping to be able to qualify under chapter 7 was because I'm so nervous about the trustee piece in 13.

No need to be nervous. Lots of people have done this.

The monitoring of every penny in/out of my checking account.

That's not only a myth, it's unsubstantiated. In the supermajority of Chapter 13 cases, the Trustee leaves you alone. Other than, in some districts, the requirement to send a copy of your tax return to them, the Trustee doesn't bother you. Fewer than 10% of cases ever suffer an increase in payments (due to that tax return showing increased income). They don't watch your accounts. They really don't watch anything you do... except in the cases where you have to send a copy of your tax return annually.

Right now my lawyer has estimated my monthly payment to be $640 so it sounds like even buying a car won't change that a whole lot.

Ummm, it would. If that's your DMI amount then your car payment would come from that! If that's your DMI plus your attorney fees, then you may not have enough for a vehicle. You'll have to ask your attorney to run the numbers with a $300/month car payment. Plus, you would be allowed to claim (approximately) $200/month for car maintenance (called the ownership allowance).

You'll have to have your attorney run the numbers with a car!

I am divorced & don't own a home so I feel like that puts me at such a disadvantage. I'm also 57 & have nothing in retirement so my plan was to increase my 401 contributions tp 10% if I was able to discharge it all in chapter 7. Thanks for the info, now I wait to see when the lawyer responds to my question.

Whether or not you can "start' contributing 10% now is a question for your attorney. Some Chapter 13 Trustee don't like it when you change the contribution just before filing (as a tactic to reduce your DMI).

These are all things you should clarify with your attorney.

[Barbisi]

Chris66, pretty much what everybody else wrote is dead-on true!
Zombie13 and I spent probably 10K+ to keep the two wretched Sentra models running and, in the end, when we finally were rid of them one month after the discharged BK13 closed in May 2022, we only got 2k trade-in for the 2013, and $200 cash at the scrap dealer for the 2005.
So, if you can find a way to finance or buy another car in better shape, do it now - don't wait.