Question Motion to Incur New Debt - Finding Auto Loan

[klange]

I am currently in a Chapter 13 BK in August of 2009. I do not have a discharge yet.

In talking with my attorney she said that I can file a motion to incur new debt in order to finance a vehicle. But BEFORE I can do that I have to get a contract on a vehicle before she can file the motion. After filing the motion for the new debt it takes 21 days to find out whether or not I have approval to do so. I don't know any dealership that would hold on to a vehicle for 21 days waiting to see if it was approved for financing.

The problem with this is I can't seem to find anyone that has actually done this, or has found a bank that will finance someone who does not have a discharge on their BK yet. I can't get a contract without a discharge/ motion, and I can't get a motion with out a contract.

Does anyone have any experince in this?

[WhattaMess]

I don't know if you have a Carmax in your area but we went through the exact situation you are going through. Carmax worked with us and told us they do deals like it all the time. Might be worth a look.

[despritfreya]

What you have described is correct. The sales contract must be conditioned upon Court approval. No approval, no contract. The 21 days has to do with, what is called, negative notice. The Motion is filed, a Notice of the Motion and Time To Object is sent to all creditors and interested parties. If no one responds/objects, the Judge will enter an Order approving the Motion. Typically, at the same time you file the Motion you need to file an Amended I & J showing that, with the new car payment, you can still afford the Plan payment.

I have done this on a routine basis. Many local dealerships are use to the court requirements. I tell my clients to meet with someone in the finance department before they talk to a sales person. Some dealerships are easier than others to deal with. Ask you attorney which ones are better.

Des.

[papie]

What information do they need for the contract? My trustee requires five things:

type of vehicle to be purchased (make and model)
amount to be financed
length of finance
interest rate of finance
monthly payment

I had the same issue and finally ran across a dealer that told me to submit exaggerated numbers. I had done enough research to know that what kind of vehicle we needed and the finance terms we would get. Check out autotrader.com to get a general idea of the prices for used vehicles in your area.

Go here for an auto loan calculator: http://www.bankrate.com/calculators/...alculator.aspx

This is what I submitted to the trustee:

Nissan Altima
$12000
72 month loan
23% interest
$300/month

Of course, we only intended to spend $8k-$10k on the vehicle and we knew out interest rate would be around 20%, we also knew (by using the above calculator) that $10k @ 20% interest for 6 years would be just under $250/month. The numbers we gave him allowed us some extra padding though. We were able to go to autotrader.com and find several local small and large dealers that had Nissans for sale in our price range, and with the letter of approval from the trustee for the above amounts we pretty much had the freedom to choose whichever one we wanted as long as it was a Nissan Altima and stayed at or UNDER those numbers. The inflated numbers gave us some flexibility. The trustee wouldn't have a problem if we spent under what he approved.

The first time I submitted the information to the trustee I tried to be vague. I told him our interest rate would be between 19% and 23% and we would spend between $8k and $10k and our payment would be between $225 and $300/month. I got a nasty letter that said they needed exact figures. So, my inflated figures worked. You may want to talk to you lawyer about it and ask if it's okay to do that w/ your trustee, since they all seem to be different. It sure as hell beats going out and finding a vehicle at one of the few places that will hold a vehicle for 21 days. Carmax, in my opinion, is a total ripoff.

You should also expect to put down a decent downpayment of at least a few thousand.

[BKParalegal]

@klange

I can't recommend one company over another but i have referred a lot of our clients to a national firm that works with dealerships across the country. You call them and they can pre-approve you for a maximum monthly payment and then refer you to the dealers they work with in your area. And the dealership will then work with you to find a car that fits the payment amount you were approved for. They the work with your Atty to provide all the necessary info for your motion.

If you want their info, then PM me.

Good luck

[klange]

Thanks all so much for the info! This has helped a lot. I use to work for a buy here pay here lot in the finance department, so I know a little about the financing side of it, but didn't know it was even POSSIBLE to get a loan with out approval. But all of your suggestions have benefitted my search and what to expect. Thanks again!

[woeisme]

Did you get your loan yet? My trustee took a Motion to Incur Debt prior to the financing, we suggested ~$300/month and he approved pending seeing the actual contract, so was able to then go find vehicle with that tentative approval in our hands to work with. Only tripping point for us was that the dealer we found (a Buy Here Pay Here place) that would work with us wanted to charge us 18% interest and Trustee had said maximum he'd allow was 17.9. We increased downpayment slightly to decrease interest rate, and got overall payment at $313/month at 17.9%, took contract to trustee who submitted to Judge who approved it, and we got our minivan. So in Ohio we had a kind of "pre-approval" process, don't know how Arkansas is.

[klange]

Haven't gotten a loan yet, going this weekend to a dealership in the area that said they have done it plenty of times before to be familiar with it. Which is a good sign. We will see how it goes through once my attorney files the motion and all the rest of the fun stuff that goes a long with it.