I don't get it...722 replacement & regular financing

[alice0427]

I have been looking on here all night trying to figure out why it is ok to do a 722 REPLACEMENT (not redemption), but it isn't ok to skip the offer from the 722 people and just go with a second-tier loan.

We were approved for a 722 replacement, but we can get a much nicer vehicle through other financing sources. We are still in Chapter 7, and the dealership we were talking with has vehicles that will meet the 722 program requirements, but we could get a nicer vehicle with a lower interest rate (slightly higher miles, but still a great vehicle) if we go through one of their lenders.

Why would it be ok to do the 722 replacement, but not other financing. We would still be replacing the vehicle we surrendered at the same payment we had before.

I don't get it!

[alice0427]

For anyone who might be rolling his/her eyes at how silly we are to try to be buying another car during bankruptcy, we are in a strange situation. My DH's car is acting up too. He could fix it, but he's leaving for a 6-month deployment on the 28th (next Monday), and there's no way he can get the parts and get it fixed before he leaves. That's going to leave me and my 18-month-old son without transportation. I feel that right now we don't have a choice but to buy something! I'd rather wait, but if we do, it means I'm stuck for 6 months. DH is going to have to buy the car, because he's the wage-earner. I can't go for 6 months with no car!

[StaciMM]

I don't see anything wrong with trying to get into something reliable yet affordable. We did the replacement vehicle and have no regrets.

As to your question-I don't know. While its generally accepted to not apply/use credit during BK I don't know where that is grounded (code, etc.).

[Lightning]

It's probably grounded in common sense. If you're claiming to be unable to pay existing debts, why should you be allowed to incur new debts.

[Pinktiger]

Lightning, my bud: If you don't know the answer to the original question, why put your nose in the discussion with a snide remark? Actually, I wonder about someone who claims to be so smart with money and has all the answers who comes to a bankruptcy discussion board and takes pot shots at we losers here. (Not that we are really losers, but you obviously think so.) Don't you have any friends? don't you have anything better to do on a Friday afternoon?
I think the question was, why is it all right to do a 722 redemption on a vehicle when it is not OK to get another loan. The answer is in Section 722 of the Bankruptcy Code as revised in 1978, which allows a Chapter 7 debtor to redeem certain personal property at liquidation value.
I think it has to be necessary property. So if you don't have a car that runs, you can replace it at liquidation prices with a vehicle that does run. You are also allowed to redeem this necessary property at liquidation prices.
For example, in the case of real property (a house), this redemption right actually acts as the right of first refusal on the property.
A car is very similar. Court cases have held that a debtor has the right to purchase a car at the wholesale, auction price from the lienholder.
Car dealers are using this 722 redemption/replacement as a way of selling you a car at liquidation rates.
However, for more detailed explanations you should ask an attorney. I'm not one.

[alice0427]

I was finally able to get in touch with my attorney. She said it was fine for us to buy another car as long as we didn't change our overall picture too much. The financing could have come from anyone, we just had to be comfortable with the terms.

We ended up getting a nice 1999 Ford Windstar with about 70,000 miles. Our payment will be $275 for 30 months. I don't think that's too bad of a deal, considering we had originally planned to reaffirm on my car. I had a payment of $244 and I had 24 months left to pay on it. Our insurance on the van is $18 less than on my car, so the total difference per month is $13 month more.

The deal on the Windstar isn't final until tomorrow morning when the dealership can get the paperwork faxed to them. However, everything fits within their guidelines, so they were confident it would be fine.

I'll be sure to post the final details because I'm sure others will be interested in the 722 program.

[Genenco]

Lightning, my bud: If you don't know the answer to the original question, why put your nose in the discussion with a snide remark?

Pinktiger, you might as well ask why some boys go up and kick little girls for some reason. Simple, it makes them feel good about themselves.