HELP! Bought new car prior to filing BK next month... Some questions.

[caligirl3]

New car (better gas mileage/smaller engine)- My credit score came in at 680 and Mazda approved me for 0% interest for 60 months. I got my new car on Saturday. I'm still half expecting the deal to fall through, since I've never been offered 0% for anything before. The loan is from JP Morgan Chase, but I haven't received any paperwork from them just yet. What if Chase doesn't reaffirm my new auto loan? Is that possible? Also, can they change the interest rate? I'm very worried about this. I don't want to lose this car. Also, Chase is my checking acct bank (direct-deposit). I've just applied for a new checking/savings at Bank of America in order to not bank at the same place as the lender. Is this necessary?

Old car (poor gas mileage/big engine & 86k miles) - My car payment on my old car isn't due until the 27th of this month, but I'm not quite ready to file BK yet (likely in a month). Should I call them to surrender the vehicle now, wait until I receive some paperwork on my new auto loan & not pay? Should I avoid their calls & include it on the BK? Will it matter?

Thanks!

[Trudy]

Wow. I could be wrong but I thought Bankruptcy was about not having enough income to cover the bills you have been paying consistently. I don't think (and I could be wrong because what do I really know?) that the BK court will discharge your previous debts in favor of your new car payment. If you can't pay the expenses you have, you probably won't be able to pay the new expenses you made. If you have two vehicles, with loans on both, one of them is NOT going to be reaffirmed-most likely the new one, the one you owe the most on. Even without that second loan, it looks really shady. Bankruptcies are not automatically granted. At the 341 meeting, you are going to be asked many questions about your assets and if you defaulted on one auto loan to get another one, it is not going to look good for you. Especially if you got loan # 2 before defaulting on loan # 1. It looks like a well planned case of trickery!

[caligirl3]

Is your reply based on any legal theory? My Attorney advised me that it was prudent to secure reliable transportation prior to filing rather than hoping my old car (nearly 100k miles on it) that I owe more that it's worth on, would last the next 10 years.

[bcohen]

Is your reply based on any legal theory? My Attorney advised me that it was prudent to secure reliable transportation prior to filing rather than hoping my old car (nearly 100k miles on it) that I owe more that it's worth on, would last the next 10 years.

No, Trudy's reply is not grounded in any valid legal theory. In fact, smart attorneys commonly advise their clients to replace an older/unreliable/unaffordable car prior to filing for bankruptcy protection, as part of the pre-planning. There is nothing wrong with defaulting on a car loan--or any other debt--prior to filing, and neither the judge nor the trustee will attempt to penalize you for doing so.

Since you have already purchased the replacement vehicle, you need to wait until the loan is funded, and you receive the registration papers, showing that the transaction has been finalized. Once that has occurred, Chase can no longer "cancel" the new loan, and you can quit paying the other loan and let the lender repossess the car.

[mynameainttracy]

We dumped a lease and bought a car after our first meeting with our attorney. It wasn't our intention to include the car in our plan at all, but our attorney tried to do a cram down. BoA fought it so we just ended up including the car in our plan and got the interest rate reduced by the trustee. In the end we paid it off 2 years earlier than originally financed and saved some interest.

[BobMango]

I know a number of folks that dropped expensive leases on cars they really couldn't and instead purchased more affordable cars instead. You are in a better place to do that now than after you file.

As far as your loan goes, they cannot change anything (interest rate, balance, payments, etc) on it as a result of you filing bankruptcy. They will try to get you to reaffirm, but unless they offer something like a reduced payment or principal, there is no reason you need to do that. bchoen's advice is sound, make sure the loan is funded before you file and you should be fine.