Buying new car prior to filing bankruptcy

[faith2006]

Is it a bad idea or will it make getting credit card debt discharged if I buy a new car prior to filing bankruptcy?

[HHM]

How will you be paying for this new car? (by 'new' do you mean a NEW car, or just a used, different car than you have now).

[celtic1]

Is it better to buy/finance a new care of buy/finance a used car/ I don't have the money to pay for a car in full but I could finance a car for less than my current lease.

[faith2006]

meaning a brand new car. and the car would be financed.

[HHM]

It shouldn't be a problem, but it will raise some questions in the trustee's mind about your reasoning for filing BK.

Also, you car payment shouldn't be too much more than the one your paying now.

[celtic1]

Do you think the trustee would have a problem if I bought/financed another care for less than my current lease payment if I turned in my leased car after I filed my petition?

[J Armstr]

I bought a new car in May and filed Ch 7 BK in June. It's important that the lien holder is on the title prior to filing within 20-days of purchasing the car. I understand that car dealerships have 30-days to do this, but it's imperative that it is done with 20-days of filing. Something to do with a BK code/rule. Talk to your lawyer. I had no car payments, but a real old truck. My lawyer recommended I get a new car now while it's easier to qualify. She said not to buy a BMW or porsche though! :-)

[HRx]

just reaffirm the loan under the same terms.

[celtic1]

Do you think the trustee would have a problem with this? I have been told to get financing in place and then go sign the paperwork on the day the petition is filed, so it doesn't show on my credit. And then turn in my leased car the next day.

[FloridaGirl]

"I bought a new car in May and filed Ch 7 BK in June. It's important that the lien holder is on the title prior to filing within 20-days of purchasing the car. I understand that car dealerships have 30-days to do this, but it's imperative that it is done with 20-days of filing. Something to do with a BK code/rule. Talk to your lawyer. I had no car payments, but a real old truck. My lawyer recommended I get a new car now while it's easier to qualify. She said not to buy a BMW or porsche though! :-)"

Could you explain this a little better, J? I'm asking because my friend is in the same situation you were in. She needs to file BK, but she has a car which is in need of a new engine. It is only a 2000, but it has almost 90,000 miles on it and it barely runs. The car is paid off, but what good is it if it's about to fall apart? She definitely doesn't have the money to fix it. She is going in a couple days to try and finance a newer car before she files BK. She knows she won't be able to get another car after BK for a while, so she wishes to try and do it now before she files and her credit is shot. Her father is going to be helping her make the payments if she is able to get something else. What is this about the lein holder being on the title within 20 days of purchasing the car? Do you have any idea why this is, and how would she ask for this to be done without letting the dealership know she is going to file for BK? Of course she will reaffirm the debt, but she is afraid the deal will fall through if they know she will be filing for BK. Plus, if you don't get the title until the car is paid anyway, how will you even know if what you are saying has to be done is actually done? I'm just trying to help her out. Thanks for your response!

[J Armstr]

Hi FloriaGirl! I don't understand the reasoning behind the 20-day requirement that the lienholder is on the title. I just followed my lawyers instructions to the tee. She told me to go buy a truck with a payment between $400 and $500 a month. Not to buy anything fancy, but something comparable to what I had before ('94 F150 w/ 190K miles). I bought a 2005 F150. My lawyer told me to wait 3-5 days after the financing is secured to call the dealership and tell them that it's imperative that the lienholder is on the title within 20-days. The dealership asked me why and I told them I was filing BK. They asked me if I was planning on keeping the truck and I told them yes. They said good and jabbered on a bit that it will help rebuild my credit by keeping the truck. I repeated the 20-day requirement again that the lienholder is on the title and they said no problem. The dealership called me 4-days later and said it was all taken care of. It was pretty easy, but I was nervous as hell waiting the 3 days to call them. I hope this helps.

[FloridaGirl]

Yes, J! That was a tremendous help. Now I can set my friend's mind at ease about getting a newer vehicle. Thank you!

[gak555]

So, in a nutshell let's say I own a car valued at $5,000 with 6 more payments to go. That of course would mean I will have equity built up.
In Virginia you can keep $2,000 for a vehicle. Does that mean they will sell the car off, give me $2,000 and keep the rest. (assume I am planning to file in about 6 months).

With that in mind would it be better to buy a repacement vehicle with a lot less miles on it at about the same monthly payment where very little equity is built up ?

Also I have heard of something called "a wildcard exemption " that you can apply to personal property. Would this cover an existing vehicle?

[SinkingFast]

Yes, the Trustee has to pay you your exemption amount on the car if he/she siezes it to sell. Chances are, if the car is older, higher mileage, the Trustee won't take it. He/she will just figure an amount their happy with and let you buy it back from the Court. In payments over, say a year, of course.

The Wildcard only applies IF your State exemptions have one OR if you're allowed to take the Federal Exemptions. Not all States have a Wildcard allowance. Very few States allow the Federal exemptions.

[gak555]

So, Sinking Fast. What about the idea of buying a replacement vehicle, using my existing car as a trade in and keeping payments about the same. There would be very little equity in the newer car. Would they just tend to leave that alone as long as I re-affirm the debt.

ps. Your posts are very informative.