Buying a car before bankruptcy.

[wellnowwhat]

I've seen several suggestions here and elsewhere that one should buy/get a loan for a car before bankruptcy if they are going to need one after discharge/during repayment.

How sound is this advice, typically? The reason I ask is that my wife and I currently have two cars, but one is a lease that I am planning on surrendering to the dealer. My commute is about an hour away with little access to public transportation, and my wife is about to have a baby so we don't feel comfortable leaving her at home without a car.

[keepsmiling]

Like all answers... it depends.
Do you have a good deal on your lease or is it overpriced?
Usually we recommend this for people going into a 13. Which you won't be doing.

[keepsmiling]

When is the lease up?

[wellnowwhat]

When is the lease up?

The lease is up in February of 2015. I've only had it for about a year and I am way over mileage, as right after I got the car I got a job where I traveled a lot. That's part of the reason I want to get rid of it (that and the payment is somewhat insane).

[keepsmiling]

Hopefully someone who knows more will be along soon, but seems timing could be tricky. What's the penalty for early turn-in? It would be discharged, yes.... but would you have to qualify for the new loan with the lease payment showing up on your cr?
Now I am very curious to see how this would all work out! Hope we can figure it out

[wellnowwhat]

What's the penalty for early turn-in? It would be discharged, yes.... but would you have to qualify for the new loan with the lease payment showing up on your cr?

That's a good question. I believe the early turn-in fee is $1500, plus the remaining balance on the loan and any back payments (which, at this point, I've missed one payment, but I'm still within the grace period of missing that payment). I don't know how the payment would be factored in when getting new credit. Definitely will be interesting to see if anyone else has any further insight.

[wellnowwhat]

This is just one route I'm considering, by the way. Another alternative is to tough it out for the time period in which the Chapter 7 will be underway, and then try to get a new loan after the discharge is complete with my wife as a cosigner and a down payment.

I could also just save up $1000 and try to buy an old Honda or Toyota. I had a 93 Camry that I bought for $1500 with over 250k miles on it and it was a great car. It will be an adjustment going from a 2012 to an older car, but Chapter 7 isn't exactly supposed to be easy.

[keepmine]

There is nothing wrong with making sure you have reliable transportation post bk. Typically, the best time to do this is prior to filing.

[keepsmiling]

I have a 91 Camry and just had to put a new trans in
I REALLY hate driving ancient cars.

[LadyInTheRed]

I can think of two reason to buy a car before filing a Chap 7. The first is if you need the car payment to help pass the means test. The 2nd is if you still have good credit, will need to buy a car in a year and want to make the purchase while you still have good credit. If it make sense to get out of your lease now, the 2nd reason applies.

I could also just save up $1000 and try to buy an old Honda or Toyota. I had a 93 Camry that I bought for $1500 with over 250k miles on it and it was a great car. It will be an adjustment going from a 2012 to an older car, but Chapter 7 isn't exactly supposed to be easy.

That sounds like the smartest option if you don't need the car payment to pass the means test. Drive an older car for a while and save money for a good-sized downpayment on a newer one in a year or 2 when you can get good terms on a loan.

[keepsmiling]

Lady, do you have any thoughts about him qualifying for a car payment with a broken lease? Will that affect ability to get a loan?
Or with an unbroken lease, might make qualifying harder. No?

[ccmisery]

I financed a car prior to a proposed 13, lawyer suggested it and pretty much everything I read stated the same. As Lady pointed out, it does help you pass the means test. I also have a leased car that is due back in around a year. Both are current, but I do not know for how long as I lost my job and am now going 7.

Both of my cars are with Ford Credit, just in case you do not know, Ford requires you to reaffirm or assume the lease, you have time to think about it and can back out in 2 months of signing it and have them repo the cars. The good thing about reaffirming is your credit won't get hit as hard, but your taking the risk of not being protected by the bk by doing so.

If you have a FICO of 675 or higher and are not late on on any bills, you can score a better APR and have more options, I was turned down by most everyone because I waited too long, Ford Credit are the only ones who would work with me. If your already past that point and planning on surrendering your lease to the dealer this will damage your chances of getting either a loan or another lease.

[keepsmiling]

I guess the point is, start shopping ASAP before your score drops and see what comes back.

[wellnowwhat]

If you have a FICO of 675 or higher and are not late on on any bills, you can score a better APR and have more options

My score is in the low 600s, so it may or may not work for me to go shopping at this point. I had thought about going to Ford, however, as the dealer near where I live has a good deal on the base model Fiesta.

[Diesel73L]

I'll relate my experience on this because I had a similar situation. Prior to filing, I owned a late model Ford F-350 pickup, but it was a regular cab (no backseat of any kind) and therefore not the best choice for our growing family. My wife had a 2001 Toyota Corolla with 160K on the clock, but it had been well cared for and maintained throughout it's life and was in great shape, plus got 30 MPG around town/35+ on the highway. Both were owned outright. The Corolla was not worth very much due to the mileage, but the pickup was worth about $7000. I had already defaulted on my cards a few months earlier so my credit was in the toilet, but my wife was still making her minimums, so I sold the truck myself to a private buyer for $6500. We used that cash to put down on 2009 Certified Pre-Owned (low mileage, carries the factory warranty, delivered in like new condition, etc...) Kia Borrego 4x4 seven seater SUV. My wife's credit was just shy of 700 at the time because she was paying on time but had a very high debt to income ratio. She had to take a longer term than we wanted (5 years) but she got a decent rate and a reasonable monthly payment. My wife took that car as her daily driver as the gas mileage is not good but her commute is only 11 miles each way. I now use the Corolla as my daily driver as I now commute 40 miles each way, so it's nice to have a gas sipper.

Of course, every transaction had to be carefully documented through each step of the process with a bill of sale, bank records, etc...that were then included in the petition by my attorney. The Trustee did ask "have you transferred any property?" to which I of course replied "yes" and then walked her through the sale of the truck and subsequent purchase/financing of the SUV. It seems awfully counter-intuitive to make a major purchase like a car prior to filing for BK, but once you realize how the process work and that it's actually intended to allow you take control of your financial situation and get a fresh start, it becomes more clear. Now we have two solid vehicles that will last for many years to come with proper maintenance while we accumulate our emergency fund without having to worry if a new engine or transmission is in our future.

I guess the point is, start shopping ASAP before your score drops and see what comes back.

Agreed-also, it sounds like you might be looking at new vehicles? Do consider a CPO-basically all of the manufacturers have CPO programs now. You basically get a like new vehicle with maybe 20-30K miles on it that has been thoroughly inspected and serviced so that it's like getting a new car for a lot less money. The other big advantage of going CPO for someone going through a bankruptcy is that you retain the factory warranty which can mean a lot less $$$ out of pocket for repairs down the road when you won't have a credit card to put them on.