What a bummer of day :(

[TooMuchCredit]

I am planning to file BK next year, April at the earliest. I just can't pay my almost $100K in Credit Credit Card debt. I was current until recently.

Since I knew I was going to file BK, I went head an bought new car. A nice new car. Since I knew I would not be able to afford one post BK with 20+% interest and several $ down.

Well attorney flat out said that would be considered abuse and I would be forced into a Ch. 13. He said they would most likely ignore the car payment in setting what I could pay my unsecured and they'd probably make me pay 100%.

There would be 0 left after house payment and paying unsecured to pay car and living expenses! He says the trustee doesn't care. They set the plan amount, and if you can't pay it, it gets dismissed and you re stuck where you were before you filed.

He told me I could have bought a cheaper car. He asked how I could amass such a debt and what I spent it on. Said I have to have more assests than I stated amassing that much debt. But a great deal was spent on travel, socializing. I don't have top notch furniture. I don't have the latest clothes.

So much for planning ahead and trying to squeak into a Ch. 7 (I make a little over twice the median...but I also stupidly used up all my equity in my house so I have a pretty high house payment. (That equity went to pay off CC debt too so essentially I have racked up 200K in CC debt in the last 10 years.) I have a problem. I don't need to ever have a credit card again. I know that now.

I would take a loss on the house and the car if I sold them. Essentially, I think he's saying that is what I need to do and pay back that loss along with the unsecureds.

[justbroke]

If you do end up in a Chapter 13, and you hacve $0 after paying for housing, cars, taxes, insurance, etc... then your lawyer didn't make a good Plan for you.

You need to have cushion in the Plan and take advantage of every allowance that you can.

If you're single with no children... and high income... then you're likely to be in a 100% plan anyhow. It's better to get married.

[laurannm]

Have you paid this attorney a retainer yet? If not, I would absolutely talk to some other attorney's. This guy sounds like some of the lawyers out there who are more concerned with forcing people into a 13 (and thus making more money).

We purchased a new car (2008 Nissan Versa) about 3 months before filing and no one set a peep. We filed Ch7 (above median) with no problems at all. As long as you make a couple of payments on it, and don't buy a Mercedes, you should have no issues.

[jeb]

As long as you make a couple of payments on it, and don't buy a Mercedes, you should have no issues.[/QUOTE]

Sounds like that is what he did. "nice car."

jb

[TooMuchCredit]

It's not a mercedes. Purchase price was $32K, but after taxes etc get rolled in, loan is $35K. My old car was 4 years old and when I bought it it was $29K so was not a huge difference.

So guess I screwed myself.

[justbroke]

I don't know how a $35K purchase takes you out of a Chapter 7. Just makes no sense. The payment, however, can be significant (depending on your interest rate)... at 10% and 5 years, that's $750/month in payments. Way too high. They wouldn't let you keep a car with those types of payments in a Chapter 7... or at least use that value in the Means Test.

Even having wrote that... I just don't get it. Something else is wrong. Worse case, you have to give up the car.

Also, the attorney's statement of "flat out abuse" is not a reason to kick you to a Chapter 13. Abuse, in regards to the Means Test and filing a Chapter 7, is about determining whether a person who passes the means test has enough money left over to support a Chapter 13, but is still trying to use Chapter 7.

Abuse in that regards is all about trying to fit into a Chapter 7. It's not about you purchasing a new car.

I still don't get it. If the lawyer was saying your purchase of a nice new car was abusive... that's a whole different thing.

[TooMuchCredit]

It's not quite that high. It is about $150 over what is on the means test, but they allow for the actual payment amount so it seems they accomodate for higher vehicle payments.

He saw the new car and immediately said that a Ch. 7 is out of the question and that I'd be looking at a 100% Ch. 13 because of the new car. I was not planning on filing until next year. He said I would need to wait atleast a year before considering filing and even then it would be iffy. My car had 60K miles on it and I travel about 20K+ a year. I know a ch. 13 is very likely, so I bought a car while my credit was still good enough to do so. If I do a 13, I am locked in for 5 years, and my new car will have about 100K miles on it. I didn't think that was very unreasonable.

I'll try another lawyer. However, I do see online about another case of a Ch. 13 where the person bought a new car and the trustee would not allow the car payments in the expenses and set the payment several hundred $ higher.

[justbroke]

I'll try another lawyer. However, I do see online about another case of a Ch. 13 where the person bought a new car and the trustee would not allow the car payments in the expenses and set the payment several hundred $ higher.

This is not about what the Trustee allows. It is about what the IRS-based limits, allow.

They don't "accommodate" for higher costs (above the $489). What a Trustee will do, is say that since you exceed the allowance, then you must contribute the difference above and beyond the allowance back into your projected disposable monthly income. That's just the nature of the beast.

Generally, nationwide, car ownership expense is $489.00 (period). If you have a car which is even a dollar over, you are only going to get the allowance. This eats into your allowances and increases your disposable monthly income (DMI). It's just that simple.

I still do not see how the car "pushed" you into a Chapter 13. Now, if you wanted to keep the car... then you may have no choice but to go into a Chapter 13. That's not a push... that's a choice.

You see... people going into a Chapter 13 buy new cars. People going into Chapter 7 don't. (Now that's a very general rationalization... but is the status quo.)

[TooMuchCredit]

Why is it on Form 22C (Ch. 13) you are allowed to enter the actual payment for your vehicle?

If you only get the national allownce, then why doesn't the form simply have a space to enter the amount like it does for the operation expenses or living expenses.

Does that mean that since the housing limit is say $1150, and my payment is $2000, they are going to say I have that $850 as disposable?

If so I really, really am screwed.

[laurannm]

Why is it on Form 22C (Ch. 13) you are allowed to enter the actual payment for your vehicle?

If you only get the national allownce, then why doesn't the form simply have a space to enter the amount like it does for the operation expenses or living expenses.

Does that mean that since the housing limit is say $1150, and my payment is $2000, they are going to say I have that $850 as disposable?

If so I really, really am screwed.

No, you are allowed to use your actual mortgage payment on both the means test and 22C. That is one of the few actual payments you are allowed to use.

Typically though when it comes to car payments on the means test, you are only allowed to use the national allowance for your area. I saw several cases on Pacer in which the UST amended the debtors means test and lowered the amount entered to the IRS standards.

I would consult with a few other attorney's and get their opinions. Some will even run a means test as part of their free consult.

[TooMuchCredit]

And then what does one do? If they only allow the IRS limits for living expenses, then that $150 eats into that. Essentially you would have to live on n even more bare bones budget than the national standards. I have to have reliable transportation. I drive 200 miles r/t once week for work on top of my regular driving. Since it's new I would not get close to the loan amount if I surrendered and I'd then have to go out and buy another car at those 20+% interest rates that would be in the $489 limit.

That's scary.

[justbroke]

And then what does one do? If they only allow the IRS limits for living expenses, then that $150 eats into that. Essentially you would have to live on n even more bare bones budget than the national standards. I have to have reliable transportation. I drive 200 miles r/t once week for work on top of my regular driving. Since it's new I would not get close to the loan amount if I surrendered and I'd then have to go out and buy another car at those 20+% interest rates that would be in the $489 limit.

That's scary.

A Chapter 13 is really not about the Debtor's convenience. It's really about unsecured creditors... believe it or not.

Yes... if you do spend more than the allowance, then you are going to have to literally "eat" the difference. That could mean less on your table, or less for operating expenses (gas, registration, insurance, etc). This would squeeze your budget even greater. Most lawyers would consult you on not doing this.

In any event, regardless of what you think you can put on Form B22C... there are guidelines behind it (and bunches of caselaw). Unfortunately, you are not going to be able to claim the expense for a car over the National Allowance.

[albacore44]

Attorney told me to buy car

I have my consultation a couple of months ago. I was told it looked like Ch 13for me and I needed to buy a car as I was about a year away from paying off the one I have, and the trustee would want the freed up cash to go into the pot, of what the called a step plan. So I bought a $25K GMC, $600 mo payment and still paying on the other car. I think I will qualify for ch 7, and plan on filing in about a year or a little sooner. I had not heard that the trustee would not allow you to keep a car as long as you are current on the payments, and it's covered by an exemption. Is that $489 rule cover all cars or just 1 ?? If i still have the payments when i file, my 2 will total $900 mo.

[justbroke]

I have my consultation a couple of months ago. I was told it looked like Ch 13for me and I needed to buy a car as I was about a year away from paying off the one I have, and the trustee would want the freed up cash to go into the pot, of what the called a step plan. So I bought a $25K GMC, $600 mo payment and still paying on the other car. I think I will qualify for ch 7, and plan on filing in about a year or a little sooner. I had not heard that the trustee would not allow you to keep a car as long as you are current on the payments, and it's covered by an exemption. Is that $489 rule cover all cars or just 1 ?? If i still have the payments when i file, my 2 will total $900 mo.

It's $489 per car. But it's exclusive to one car. You can only have 1 or 2 cars, depending on your household. If you're single, you are probably not going to get a second car allownace, unless it's for the production of income.

[albacore44]

It's $489 per car. But it's exclusive to one car. You can only have 1 or 2 cars, depending on your household. If you're single, you are probably not going to get a second car allownace, unless it's for the production of income.

OK. So I'm married, have 3 cars/trucks, 1 is paid for. Would I get $489 x 2 ?? and this is only for qualifing for the means test ?? If i qualify for a Ch 7 would the trustee force me to say a car if i can exempt them under my exemptions/wildcard. I really have no equity in them (2) due to depreciation, but i do need to keep them