A Few Questions

[danaf]

1. How does one figure out how much equity they have in a car? If I've paid over 5k into my car loan but the car is worth less than the loan repayment terms, and worth less in Kelly blue book than the repayment - then is it correct that I do not have equity in it?

2. If I were to get a new car, I would still owe 1500 to the lender on the vehicle after the trade in. Would paying this difference raise flags? Would it be considered a preferential payment?

3. If I got a new car, would it be better to roll the taxes into the loan or just pay them to keep my loan amount down? I'd like to just pay them to keep the loan amount down.

3. I stupidly cashed out a small 401k back in March amounting to 3500 (it wa 5k, 3500 to me after taxes). How do I reflect this on the means test? Does one add it to yearly income and divide it by 12?

4. I relocated last year. I read that I have to be domiciled in my new state for 2 years before I can use the state exemptions. Does this mean that if I file, I have to use my old state's median income too? The median in my old state is a bit higher, but the exemptions are less. Either way, I am below on income in both states. But where I'm confused on this point is in the downpayment I'd make on a new car. If the old states car exemption is 2500 then would putting that amount down on a new car be problematic?


thanks for any input

[lrprn]

1. How does one figure out how much equity they have in a car? If I've paid over 5k into my car loan but the car is worth less than the loan repayment terms, and worth less in Kelly blue book than the repayment - then is it correct that I do not have equity in it?

That's correct. A car you owe more on than it's worth has no equity.

2. If I were to get a new car, I would still owe 1500 to the lender on the vehicle after the trade in. Would paying this difference raise flags? Would it be considered a preferential payment?

What chapter are you hoping to file - 7 or 13? If you want to file Ch 7, then getting a new car right before filing and making no payments on it could raise some issues with the trustee. However, if you are filing Ch 13, you can reaffirm the loan to remove any lender or trustee suspicions.

3. If I got a new car, would it be better to roll the taxes into the loan or just pay them to keep my loan amount down? I'd like to just pay them to keep the loan amount down.

Depends on which chapter you plan to file.

3. I stupidly cashed out a small 401k back in March amounting to 3500 (it wa 5k, 3500 to me after taxes). How do I reflect this on the means test? Does one add it to yearly income and divide it by 12?

I sure wish you hadn't done that - I bet you wish now you hadn't either. Here's the bad news. If you filed now, you would have to count the entire $3500 into your last-six-month gross income. That means that when you doubled the six-month look-back for your annual gross income, you'd get a double hit from the $3500 - it would look like you made an extra $7000 over the last 12 months. The only way around this will be to wait to file until after October 1 so that the six-month look-back won't include any income you made in March.

4. I relocated last year. I read that I have to be domiciled in my new state for 2 years before I can use the state exemptions. Does this mean that if I file, I have to use my old state's median income too?

You are right that you have to use the previous state's exemptions, but you use your current state's median income. You can file your case in your new state too.

But where I'm confused on this point is in the downpayment I'd make on a new car. If the old states car exemption is 2500 then would putting that amount down on a new car be problematic?

Are you planning to buy a reasonably priced used car and make at least a few payments on it before you file? If you are, then it's the value of the new car on the day you file compared your former state's allowed auto exemptions plus wild card (if the state has one) that matters. Bottom line....the more time that passes between the car purchase and your filing, the better.

Of course, I strongly encourage you to make 3-4 appointments for free consultations with experienced bankruptcy lawyers in your area, then ask every one of these questions to get solid and knowledgeable legal advice from someone in the know about the local trustees' preferences and earlier case decisions around recent car purchases before filing in your district.

Good luck - keep us posted on what you find out, ok?

[danaf]

Thanks for the response LRP.