Family help with vehicle

[Flash2007]

I'm thinking about filing chapter 7 bk. but I don't want to involve family. 10 months ago my mom gave me $8,000 to buy a car. I'm the only person on title and I'm paying mom back $200 per month. There's still money owing to her. Should I list her as unsecured creditor? What if I go to DMV and put her name on title - can I then put her down as secured creditor? I'm worried I'll have to report the gift and then mom will have to pay it to court. It's the only car I have.

Any ideas?

[justbroke]

She's an unsecured creditor. You can't go and fix the title now, since most "liens" must be recorded on the title within so many days! Besides, she's an unsecured creditor. The only way to make her a secured creditor is if she loaned you more against the equity, but the equity may still be exposed. (My simple math shows $2,000 paid in 10 months (at $200/month), with a remaining balanced on the "unsecured" loan of $6,000. That still makes it $8,000 in equity.)

If you are lucky to live in a State with very generous "wildcard" exemptions, such as California or a State allowing use of the Federal Exemption scheme, then you have an issue. The issue is that you have an asset worth $8,000 or so and you will need to exempt it.

Do not try to "fix" the title. It is an unsecured loan (period). In what State do you reside and will file?

[despritfreya]

Not only is there a potential issue as to the equity in the vehicle but you also have a preference problem. Mom is an unsecured creditor, just like any other unsecured creditor. However, she is also an "insider" and payments made to her within 1 year prior to filing can be recovered by the Trustee.

There are ways to protect mom from the Trustee - such as you cutting a deal with the Trustee to pay the estate the preference amount instead of the Trustee going after mom. Please, please discuss this issue with a local bk attny before you file bk so that you know how to handle it. And. . . do not pay any more $$ to mom until after you file.

Des.

[justbroke]

Des, thank you for bringing up the potential preference issue! I didn't even consider that the poster may not be paying other creditors while still paying Mom!