Use tax refund to pay off vehicle or not

[mintz]

We are filing Chapter 7 sometime in August. We have 2 vehicles that are with a CU and I understand about cross co lateralization. One car is upside down and the other is not. We are thinking about using our tax return and some of our 401k to pay off the car that is not upside down. Should we do this before we file or wait until after we file? We will soon quit making payments on the other car as we simply cannot afford to keep making them and save for the lawyer. I do not want them to move the funds they lose to the other car and then we are screwed. I hope this makes sense???

[jennordhavn]

It depends on whether the paid off vehicle will be exempt or not. Do you know how much the exemption for a vehicle is in your state? If it falls under the exemption, this may work. If not, you shouldn't do it.

[Trixie007]

Will you be able to exempt the vehicle if you pay it off?

That does seem to be the easiest way to get the title for the car, but - if the CU cross-collateralizes, will they release the one title before the other is paid off, or will they hold on to it? If they won't release it, you could still be in the position of losing that car, even if you pay it off.

[mintz]

yikes, I guess this will be an attorney question then. We live in Texas. I mentioned this to a lawyer and he said we should get a loan at another bank or pay it off if we could but lawyers sometimes don't tell you the entire picture

[mintz]

when do I quit making the payments on the car I am turning in? How long do I have before they repo it and how long before they do their cross colaterization?

[SubPrimeME]

when do I quit making the payments on the car I am turning in? How long do I have before they repo it and how long before they do their cross colaterization?

Is the payment part of your means test/schedules? If so then you have to keep paying. If not, I would stop right before the 341, it takes about 90 days after the first missed payment. So you wouldn't want them to repo prior to the discharge....

[mintz]

yes it is part of the means test/schedules. Do we stop paying on other credit cards then, we simply cannot afford all the bills.

[mintz]

yes it is part of the means test/schedules. Do we stop paying on other credit cards then, we simply cannot afford all the bills.

[mintz]

Under Federal Bankruptcy law and Texas law a consumer debtor is allowed to choose between the exemptions allowable under the U.S. Bankruptcy Code or the Texas Exemptions. The U.S. Bankruptcy Code exemptions is a motor vehicle up to $3225. Under the Texas exemption, a consumer is generally allowed to keep a vehicle for each member of the family that count toward the $30,000 single/ $60,000 head of household personal property exemption limits

So, if my car is worth $15.000 and I pay it off, do I get to keep it or will they take it. What all is included in personal property exemptions?? Equity in my home?

Thanks