Cars during chapter 7 or 13

[Rjrl926]

We have two high car payments due to terrible credit and having been upside down on one of our cars. We have one car that’s 900 a month with very high interest and another at 1040 a month due to very high interest and it’s a lease through American Honda.

during consults with lawyers who want us to go chapter 7, the expectation is that we’d have to give up a car. The issue is my wife is home with our son whom was just born with a disability and health issues and i often travel for work throughout NJ/PA/De. We absolutely need both cars.

Inwas told in a chapter 13 even if the trustee rejects the car payment, that ultimately it’s up to me to affirm it? Any help is appreciated. We haven’t decided on a lawyer yet as we want to educate ourselves as much as possible here first

[shipo]

The best advice I can give is to interview three to five attorneys and ask your questions to him/her; there are so many moving parts to a bankruptcy, especially a Chapter 13, it will be difficult for us to give you good guidance. With that said, if you opt for Chapter 7 and surrender one or both of your cars, you should be able to buy something new(ish) fairly quickly following the discharge. The key here is to think small and inexpensive.

[justbroke]

A $1,040/month car payment is going to be a problem no matter how you slice it up. As shipo mentioned, you should obtain 3-4 more free consultations to get their take. A payment over $619/month is a "luxury" car and bankruptcy is the antithesis of luxury. In a Chapter 13, a trustee is not going to like either payment. A debtor simply cannot substitute their lifestyle at the expense of creditors. Unless you propose a 100% plan, a Chapter 13 trustee isn't going to like those payments at all.

You're going to need to think "small" and "inexpensive" at this point. Your payments for both vehicles are nearly $2,000/month. A payment of $1,200 a month for two would be pushing it. A Chapter 7 trustee doing their analysis, is going to say you have at least $800 in disposable monthly income (DMI) just between the vehicles. That's $48,000 over sixty months in a Chapter 13. That's a very juicy number.

Definitely get a few more free consultations. I don't see you keeping both vehicles at those prices.

[despritfreya]

While local procedure may vary, generally in a Chapter 13:

1. The vehicle being financed can be paid through the Plan. If you have had the vehicle for less than 910 days, the lender gets paid in full its principal balance. But. . . the interest rate can be reduced to what is known as a "Till rate", probably around 10% or a bit more. If you have had the vehicle for more than 910 days you can bifurcate (split) the lender's claim into secured and unsecured. The secured portion (value of the vehicle) gets paid through the Plan with interest. The unsecured portion is treated like a credit card and shares in whatever distribution there will be for unsecured creditors.

2. The vehicle that is leased - assuming it is a true lease - is a different story. The lease is either assumed or rejected. If assumed, you must make the regular payment as required under the lease. Any missed payments (default) can be paid through the Plan. The terms of the lease (but for curing a default) cannot be altered. If rejected, you give the car back. No further payments are required. The lessor will have a general unsecured claim (like a credit card) for "rejection damages" but that is no big deal.

As it relates to the amount of the payment, the financed vehicle is not an issue since that payment will "go away" as the vehicle will be paid through the Plan. The lease at $1,040/mo could be problematic (as others have stated).

In a Chapter 7, if you want the vehicles, you must make the payments.

Des.

[Rjrl926]

These aren’t luxury cars. The lease (Honda civic ends In 2027) payment is high due to interest (bad credit during this high interest rate time) We have a disabled infant and I am the sole provider. I can’t take the risk of turning in a car when my son starts physical and early intervention therapy at 6 months old. I travel a lot for work and need a car. My wife is the primary care taker

so if I want to keep both during a chapter 7, I have to keep them out of the chapter 7 filing?

if it’s chapter 13 and the trustee rejects the lease then I would assume it if I chose to keep it?

[justbroke]

You can't keep anything out of a Chapter 7. What despritfreya mentioned, and I didn't reference, is that your lease will end at some point (probably soon). The lease you'll have to accept (to continue) or reject (to get rid of the lease).

While the vehicles may are not actually "luxury vehicles" they are considered to be a luxury payment. The bankruptcy allowances are currently at $619/month for a vehicle. Anything higher is considered a luxury payment. I know it's not a luxury to you, but the court uses the IRS Financial Collection Standards to come up with a reasonable expense for a vehicle. The bankruptcy courts use that IRS standard.

If in a Chapter 13, the one with the loan, as Des mentions, will be essentially refinanced into a new loan. Depending on when purchased, you may even be able to adjust the value while the interest rate is adjusted.

Hopefully you can consult with a few local attorneys and they can fashion a plan for you.

[Rjrl926]

You can't keep anything out of a Chapter 7. What despritfreya mentioned, and I didn't reference, is that your lease will end at some point (probably soon). The lease you'll have to accept (to continue) or reject (to get rid of the lease).

While the vehicles are not actually "luxury vehicles" they are considered to be a luxury payment. The bankruptcy allowances are currently at $619/month for a vehicle. Anything higher is considered a luxury payment. I know it's not a luxury to you, but the court uses the IRS Financial Collection Standards to come up with a reasonable expense for a vehicle. The bankruptcy courts use that IRS standard.

If in a Chapter 13, the one with the loan, as Des mentions, will be essentially refinanced into a new loan. Depending on when purchased, you may even be able to adjust the value while the interest rate is adjusted.

Hopefully you can consult with a few local attorneys and they can fashion a plan for you.

The lease ends in 2027. My consultation is tomorrow. So I’ll know more. The car situation really has given me anxiety.

[justbroke]

The lease ends in 2027. My consultation is tomorrow. So I’ll know more. The car situation really has given me anxiety.

The lease seems to be just about 3 years away unless it ends in early 2027. If you end up in a Chapter 13, as mentioned, they will want the lease to go away and then contribute the $1,000+/month towards the plan. Of course this is just my view from 10,000 feet above. Your consults can get into more detail with you and look deeper in the vehicle payments.

[Carmella]

The lease seems to be just about 3 years away unless it ends in early 2027. If you end up in a Chapter 13, as mentioned, they will want the lease to go away and then contribute the $1,000+/month towards the plan. Of course this is just my view from 10,000 feet above. Your consults can get into more detail with you and look deeper in the vehicle payments.

Let us know what you find out from your consultation.

This just rung a bell with me since we had a car, low car payment, but it was paid off during the plan and then the payment amount was calculated into the remaining months of our plan...We were in Chapter 13.

Watch for the consultations, too, as we had a bad one that wanted us to hire him to contact our credit card companies and settle told us we didn't qualify for Chapter 13. I would ask for several options if something like this was brought up. I didn't know any better and hadn't found this forum at the time we went to see an attorney and was lucky to find listen to my gut feeling and fortunate to have another attorney recommended by a friend. That attorney was so specialized in BK and had a long track record in my district.

[Rjrl926]

I found a reputable attorney here in NJ and he went over our situation. He told me not to worry about the cars. With having 5 kids and one of them being special needs/disability, he said it shouldn’t be a problem.

[justbroke]

I found a reputable attorney here in NJ and he went over our situation. He told me not to worry about the cars. With having 5 kids and one of them being special needs/disability, he said it shouldn’t be a problem.

If you have an attorney that will argue the special circumstances then you will be able to at least argue the point. I'm just more worried about a Chapter 13 and how they'll treat it in a typical Chapter 13 plan with the lease ending during the Chapter 13.

[Rjrl926]

If you have an attorney that will argue the special circumstances then you will be able to at least argue the point. I'm just more worried about a Chapter 13 and how they'll treat it in a typical Chapter 13 plan with the lease ending during the Chapter 13.

He said he has us in a chapter 7. My only issue is irs taxes. I have a balance for 19,20, 21,22. 19 and 20 can be abated. Which means I have to do a new installment agreement after the BK

[justbroke]

Yep, new agreement. I had to start a new one as well. The 2019 and 2020 taxes should be dischargeable and discharged if they meet the criteria.