Pay off Car or Wait and See...

[nw138413]

My bankruptcy attorney has been painfully slow proceeding with my bankruptcy case. In any case, I have the opporutnity to pay off my vehicle loan in a couple of weeks due to a large tax refund (which is from a business failing and the reason I'm pursuing bankruptcy in the first place).

My question is this (because my attny won't return my call grrrr): should I pay off the loan or sit tight and wait? The "net effect" to my balance sheet is the same. It makes my cash flow a WHOLE lot better ($450/month better).

Thanks in advance.

[LadyInTheRed]

Looking at your prior posts, it's difficult to tell if you are filing a Chap 7 or 13. It appears that the car is the only secured debt, so I don't think paying it would create a preferance issue. But, depending on what Chapter you file and what your disposible income his, having the car payment at the time of filing could hurt or help. Paying off the loan will increase your disposable income which could make it harder to qualify for a 7, but this may not be an issue if your debt is mostly business debt. In a 13, if you have negative disposible income, the lack of a car payment may help you create a workable plan. If your income is high enough to pay unsecured creditors in your plan, paying the loan off now will only increase what goes to the unsecured creditors. You will also be increasing the value of your interest in the vehicle which may not be covered by your state's exemptions.

Don't do anything without talking to your attorney. Call your attorney's secretary and ask to make an appointment for a telephone conference. Be specific that you want to discuss whether you should use your tax refund to pay off your car loan.

Have you already paid a retainer?

[nw138413]

No retainer paid yet.

Last year my AGI ended up about 17k due to business losses. Year before was 40K. '09 will be somewhere in between.

Was planning to schedule time next week.

Thanks.

[LadyInTheRed]

My bankruptcy attorney has been painfully slow proceeding with my bankruptcy case.

No retainer paid yet.

He's not YOUR attorney until you retain him. He has probably already given you all the complimentary consultation he is willing to give. He should still give you the courtesy of returning your calls or having a staff member do so to let you know that. Have you consulted with other attorneys? If not, you should. If you are sure this is the one you want to retain and you have the cash to pay him, let him know that and have him send you an agreement to sign and send back with the check. If you don't have the money yet to retain an attorney, that's what you should spend your tax refund on.

[nw138413]

An update....

Spoke to my attorney today (finally). We are sending him a check for his services/retainer (thanks LadyInTheRed for the clarification). He has also advised to not pay off the car at this time, but to wait until he does some more work on my case. I'm OK with that.

We also have asked him if the Bank (our major creditor, with whom we have personal responsibility along with the business responsibility) would be willing to agree to settle on an amount far less than what we owe and consider the matter final. This would hopefully allow us to avoid filing for bankruptcy protection all together (which would be very nice if it were possible).

Thanks for the input!