Can I cram 2 cars into a Chapter 13 and keep them both?

[noirman]

Hello. I am new to the forum and I searched but couldn't find the answer to this question.

I have two cars. Both are over the Ch. 13 910 day rule by a few months, and both are still being paid for. One has a KBB value of 19,000, and the other 10,000. I want to file a Chapter 13 and keep them both. My other debts are collectively about 20,000 (medical bills, credit cards, personal loans). No priority debts like child support, student loans, or tax arrears. The car worth 19K has an arrearage of around 9000 (9 payments). The other car is current. I owe much more than what they both are worth.

So I would like to cram them both (at the values listed above) into a Chapter 13. I don't qualify for a Ch. 7 right now because of the state income median. But I will in December. I just have to hold off on the overtime until then and I will. At that time, can I convert the Ch. 13 to a Ch. 7 in December (if I file Ch, 13 now)? Then when I filed the letter of intent after the Ch. 7, I would keep both cars by redemption of the market value (redemption loan).

Ok, so that's my plan. By what I have seen of the bankruptcy laws on different sites, I should be able to do this with one car. What I want to know is can I do it with two? Please let me know if I missed something or I am misinterpreting the law. Thanks in advance for your help!

[justbroke]

So I would like to cram them both (at the values listed above) into a Chapter 13.

Yes, you can cramdown both vehicles if they are indeed acquired more than 910 days prior to filing.

I don't qualify for a Ch. 7 right now because of the state income median. But I will in December. I just have to hold off on the overtime until then and I will.

Being over or under the median really has nothing to do with being qualified to receive a discharge in a Chapter 7. The only thing being under the median does, is make you exempt from completing the entire Means Test, as well as allowing you to use your Schedule I/J to determine your disposable income.

At that time, can I convert the Ch. 13 to a Ch. 7 in December (if I file Ch, 13 now)? Then when I filed the letter of intent after the Ch. 7, I would keep both cars by redemption of the market value (redemption loan).

Have you talked to a lawyer? You can't just convert from a Chapter 13 to a Chapter 7 just because you want to. What you just wrote doesn't make any sense regarding "redemption". Redemption means that you're going to pay market value through funds you have or via a loan (like USBank/722 Redemption).

Ok, so that's my plan. By what I have seen of the bankruptcy laws on different sites, I should be able to do this with one car. What I want to know is can I do it with two? Please let me know if I missed something or I am misinterpreting the law. Thanks in advance for your help!

if you are single, most Districts won't let you keep 2 vehicles because any property that you keep (and especially stripdown) must be for an effective reorganization.

I don't know which other sites you were on, but this place (BKForum) has some pretty good people on here with years of experience and a dedication to helping you understand the process.

[noirman]

Wow...thanks for the quick answer!

Clarity: What I meant in regard to redemption, was that after you file a Ch. 7, I can't remember if it's before or after it's discharged, but you have to file a motion of intent right? Like what you plan to do with the secured property. I think there are 3 options: return it, continue payments, or pay a lump sum payment of the market value of the vehicle. Since most people filing don't have that kind of money lying around, they take out a redemption loan. Attorneys advertise that they have such lenders ready to assist you with that when you file. My point was that I would do a redemption loan for one or both vehicles at market values I listed previously (19K & 10K).

Is that also your understanding? Since you already said I could cram both into a Ch. 13, I am assuming that you mean I can't redeem both after filing a Ch.7? That part I'm confused about.

Thanks again for responding!

[justbroke]

Clarity: What I meant in regard to redemption, was that after you file a Ch. 7, I can't remember if it's before or after it's discharged, but you have to file a motion of intent right?

Within 30 days of filing a Chapter 7, a debtor must file a Statement of Intentions indicating what the debtor will do with secured property.

Like what you plan to do with the secured property. I think there are 3 options: return it, continue payments, or pay a lump sum payment of the market value of the vehicle.

They are surrender (return it), reaffirm (this is more than just continuing payments, it's a re-validation of the debt), or redeem (pay market value in a lump sum).

Since most people filing don't have that kind of money lying around, they take out a redemption loan. Attorneys advertise that they have such lenders ready to assist you with that when you file.

Attorney's don't have lenders "ready"... they have the standard few that do these things, with 722 Redemption (US Bank) being amongst the most prevalent.

My point was that I would do a redemption loan for one or both vehicles at market values I listed previously (19K & 10K).

My point is that you wouldn't (generally) do a redemption on motor vehicle loans in a Chapter 13 (which is what you said you'd be filing). You would just do a cramdown and pay them as part of the plan. Redemption loans are not they are cracked up to be. They have very high APR rates and the payment can be more than you're paying now.

Is that also your understanding? Since you already said I could cram both into a Ch. 13, I am assuming that you mean I can't redeem both after filing a Ch.7? That part I'm confused about.

Okay, so a little confusing, but we can deal with this. First, you use the cramdown method in the Chapter 13 by filing a Motion to Determine Secured Status on the vehicles, and dealing with the hearings (if any) on that. As for the Chapter 7, there is no cramdown, as you'd redeem the vehicles.

My main area of concern is that you are trying to use the Chapter 13 as a temporary crutch. What you (probably) should be doing is determining if you actually qualify for a Chapter 7 now. Being qualified to receive a Chapter 7 discharge is all about your disposable income... which is indirectly related to your monthly/annual income.

I'm also thinking that you are considering doing this [I]pro se/I] and hence that's why you see my concern for your strategy. While a debtor is absolutely allowed to convert from Chapter 13 to Chapter 7 (once), you still have qualification issues, redemption issues, and everything else there is to deal with. Why go through two 341 Meetings when you can just carefully plan, and have it done once?

Now, this is me being a little more direct. You could indeed wait to just file your Chapter 7, but I believe that you are attempting to keep your $19K car from being repossessed. I don't even know why you want to keep it, but that's you. You are $9K in arrears on it, and, while it's only worth $19K by your KBB estimate, you certainly owe more on it. Then, I ask, why keep a second car which almost as much debt on it. It's probably underwater (has negative equity) as well. Bankruptcy planning is more than just trying to keep property. It's about having a winning strategy to emerge strong!

[becky20]

From my understanding, if you file a chapter 13 and cram down a vehicle and then later try to convert to a chapter 7, you would have to have enough money to not only bring your loan current (so those 9 months of arrears that you are behind would all have to be paid) but plus you'll have to have enough cash to bring the payments back to what you would have paid the entire time you were in the 13 and paying the lesser amount. For example, we're in a 13 and crammed both our vehicles. If we ever tried to convert, we'd either have to give up the vehicles or we would have to pay the two months that we were originally behind, plus the difference between our original payments before the cram for the amount of months we've paid. So if you've been paying 300 a month and with the cram it's only 100, and you've paid for 10 months, you'd not only have to pay whatever amount you're behind, but also that extra 200 for 10 months (if my interpretation of everything is correct).

I'd definitely talk to your attorney and make sure before you assume it's something you can easily do!

[noirman]

You are very helpful, I just wanted to say that.

1) Keeping two cars because one is for my daughter in military (which she will be paying for - giving me the money for) and at 10K + interest in a Chapter 13 for 3/5 years, that is far less than what I would pay otherwise. I owe 16K on it, and if it would be reduced to around KBB of 10K, it is worth it to me to keep to help her at 21 yrs old.

2) My car is valued at 19K and I owe 37K on it, and yes, I am ducking the repo on that one! Yikes! But if I could only keep one, it would be mine as the payment using the above formula in a Ch. 13 would be far better than what I have to deal with now.

I probably wouldn't redeem both if I did a Ch. 7 (as previously discussed), but I would redeem mine. If I can, I will hold out until December, keep payments up on the other car, and file a Ch. 7 with a letter of intent to redeem mine. No way 19K with interest can be more than 37K! :-)

Oh, and no matter what I do, I will use an attorney. I just wanted to have my facts straight before I went in there. Some of them didn't even know about cram downs! Haha! But they definitely know how much they charge.

[noirman]

For example, we're in a 13 and crammed both our vehicles. If we ever tried to convert, we'd either have to give up the vehicles or we would have to pay the two months that we were originally behind, plus the difference between our original payments before the cram for the amount of months we've paid. So if you've been paying 300 a month and with the cram it's only 100, and you've paid for 10 months, you'd not only have to pay whatever amount you're behind, but also that extra 200 for 10 months (if my interpretation of everything is correct).

Thanks Becky, but God I hope you're wrong! :-)

[justbroke]

From my understanding, if you file a chapter 13 and cram down a vehicle and then later try to convert to a chapter 7, you would have to have enough money to not only bring your loan current (so those 9 months of arrears that you are behind would all have to be paid) but plus you'll have to have enough cash to bring the payments back to what you would have paid the entire time you were in the 13 and paying the lesser amount. For example, we're in a 13 and crammed both our vehicles. If we ever tried to convert, we'd either have to give up the vehicles or we would have to pay the two months that we were originally behind, plus the difference between our original payments before the cram for the amount of months we've paid. So if you've been paying 300 a month and with the cram it's only 100, and you've paid for 10 months, you'd not only have to pay whatever amount you're behind, but also that extra 200 for 10 months (if my interpretation of everything is correct).

This is true, but this is why a person doing a conversion from a Chapter 13 to a Chapter 7 will more than likely do Redemption. There's no other way around it, as you mention... other than coming up with a lot of money to cure the arrears.

I'd definitely talk to your attorney and make sure before you assume it's something you can easily do!

[justbroke]

Thanks Becky, but God I hope you're wrong! :-)

She is 100% accurate and is why I keep pointing you towards the direction of bankruptcy planning. You can seriously do damage by doing this yourself, if you don't understand the implications of your decisions.

Becky is absolutely correct that since you'd still have arrears, they'd have to be cured, in some manner, after Conversion and before discharge in your Chapter 7 case.

[justbroke]

1) Keeping two cars because one is for my daughter in military (which she will be paying for - giving me the money for) and at 10K + interest in a Chapter 13 for 3/5 years, that is far less than what I would pay otherwise. I owe 16K on it, and if it would be reduced to around KBB of 10K, it is worth it to me to keep to help her at 21 yrs old.

WEll, she's not a dependent, not living in your home, so it's not necessary for an effective reorganization of you, the debtor.

2) My car is valued at 19K and I owe 37K on it, and yes, I am ducking the repo on that one! Yikes! But if I could only keep one, it would be mine as the payment using the above formula in a Ch. 13 would be far better than what I have to deal with now.

I would dump this car like the plague. In other words, I'd surrender it in a Chapter 13 or a Chapter 7. Just because you're in a Chapter 13 and cramdown the value, doesn't mean that you won't still be effectively paying 100% for the vehicle.

I probably wouldn't redeem both if I did a Ch. 7 (as previously discussed), but I would redeem mine. If I can, I will hold out until December, keep payments up on the other car, and file a Ch. 7 with a letter of intent to redeem mine. No way 19K with interest can be more than 37K! :-)

Yes, it can. Paying a $37,000 car note at 4.9% for 72 months (6 years) is only a little more than paying a $19,000 car note at 24.95% for 60 months (5 years)!!! The difference is $37/month.

Oh, and no matter what I do, I will use an attorney. I just wanted to have my facts straight before I went in there. Some of them didn't even know about cram downs! Haha! But they definitely know how much they charge.

It's good that you're learning and that you can use the information to select the best attorney.

[noirman]

Well, in Becky's scenario, if I couldn't convert to a Ch. 7, then I would stay with my plan. But if I could, I think it's either redemption or discharge.

But under any circumstances, I am using an attorney. I just want to know what to bring up at the free consultation so I get the full benefit of the time allotted.

[justbroke]

Well, in Becky's scenario, if I couldn't convert to a Ch. 7, then I would stay with my plan. But if I could, I think it's either redemption or discharge.

But under any circumstances, I am using an attorney. I just want to know what to bring up at the free consultation so I get the full benefit of the time allotted.

One of the issues not discussed, is how much is your disposable monthly income (DMI)? If you end up in a plan which requires 100% payment to unsecured creditors... the net effect could make you change your strategy.

There are just so many factors which could blur the net result. For example, if you are in a Chapter 13, and your daughter's vehicle is determined to not be effective for your reorganization sure, you'll be able to keep it. However, you'd have to pay the value towards your unsecured creditors. So if it's worth $12K, then over the 60 month plan period, you'd need to contribute an additional $200/month in your plan if you're not already in a 100% Plan. The math, decisions, and implications are not simple.

I just want you to understand that it's not as simple as wanting to do A and expecting B as the result.

[noirman]

Yes, it can. Paying a $37,000 car note at 4.9% for 72 months (6 years) is only a little more than paying a $19,000 car note at 24.95% for 60 months (5 years)!!! The difference is $37/month.

No, lol. I meant I owe 37K on it. The original loan was 45K @ 11+%. Balance is 37K with $876/mo payments. No way if I get 19K financed that it comes out to be more than that! If so, I would keep it in the Ch. 13 and pay the cram down, plus the rest at 10% of it. In other words, the 9000 would be paid at 100%, but the crammed part would be only at 10% of what I owe with the rest of my debts right. So should be like this:

19K @ whatever ch. 13 interest x 3/5 years
9000 arrears in plan at 100%
9000 balance at 10% (900) (along w/unsecured)

Isnt this right?

If the terms are too much, no matter what, I can always file a Ch. 7 and just reaffirm the cheaper car! Hahaha!

[noirman]

One of the issues not discussed, is how much is your disposable monthly income (DMI)? If you end up in a plan which requires 100% payment to unsecured creditors... the net effect could make you change your strategy.

There are just so many factors which could blur the net result. For example, if you are in a Chapter 13, and your daughter's vehicle is determined to not be effective for your reorganization sure, you'll be able to keep it. However, you'd have to pay the value towards your unsecured creditors. So if it's worth $12K, then over the 60 month plan period, you'd need to contribute an additional $200/month in your plan if you're not already in a 100% Plan. The math, decisions, and implications are not simple.

I just want you to understand that it's not as simple as wanting to do A and expecting B as the result.

I'm printing out this whole conversation so I can ask the bankruptcy attorney. You are bringing up very good points! Becky too! Thanks!

[justbroke]

The math is right... however, the Chapter 13 is a miniature "refinancing" anyhow. I was comparing the pricing if you were to Redeem the vehicle, versus if you were to include it in the Plan and cram it down. The values are still close in my scenario... only I was using $37K for the claim amount and not cramming it down, sot he number was scary to me.

If the terms are too much, no matter what, I can always file a Ch. 7 and just reaffirm the cheaper car! Hahaha!

They aren't going to let you reaffirm a car when you are underwater. it's just not in your best interests.