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Pre-13 Auto Purchase - How to approach it?

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  • Pre-13 Auto Purchase - How to approach it?

    My Audi A4 is in for what are turning out to be extensive warranty
    repairs - fortunately under warranty - but it has me thinking about
    transportation expense planning for the life of the plan.

    I'm about to break 100k and go out of warranty; thinking it might be prudent to consider purchasing / leasing something under warranty for the life of the
    plan. Due to my recent stop payments on credit cards, I am sure my FICO is
    in the tan, but I might have a chance with Audi Financial since I have w/ perfect account history with them 10+ yrs, and they tend to be loyal.

    I asked my attorney whether a higher secured car payment
    (currently $384) would simply reduce the available DMI for the plan payment
    to unsecured creditors, and if so, would it raise any eyebrows and are there
    limitations / guidelines on what is an acceptable car payment amount? I
    assume there must be, otherwise folks could be buying expensive cars instead of paying back the unsecureds... He came back with the answer "Answer: You are generally thinking correctly, it would mean less for
    unsecureds and in reality will not cost you, however, it could result in
    your being in Chapter 13 longer than otherwise."

    I'm kind of scared to walk into the Audi dealer knowing that I've likely have a horrible FICO score (although awesome history with them). Should I just be up front with them about why I haven't paid, that I'm planning to file, and that the purchase would be a secured debt that I intend to keep, not surrender? Seems that would scare them off, but not quite sure how to explain the recent cc stop payments and collections otherwise.

    Any suggestions from those who have been through this before?

  • #2
    My 2 cents: don't tell the dealer you're facing bankruptcy. They can't really submit you for financing if they know that is your plan.

    About the atty comment it may take longer to complete your plan: this must mean you are under median, and have the option of a 36 month plan. But that you also have a minimum amount to be paid in - whether that be to cover non-exempt assets, pay things that MUST be paid in full during the plan (atty fees, arrears, possibly secured debt?).

    If you are certain you'll need to replace the car between now and the end of your plan - now is probably best. Can be hard to get financing during a plan, needing the trustee's approval & needing to meet trustee guidelines in terms of payment amount, etc. Plus some find it hard to just obtain financing approval.

    Don't worry so much about what rate you'll pay. A bad rate will increase your payment but decrease your $ to unsecured. OR once you file, the loan will be paid off in the plan at a lower rate anyhow. A doubt anyone at the dealership is going to discuss the details of your credit report with you. Its just a matter of approval or not, and on what terms.
    Get mortgage modified: DONE! 7 months of back interest payments amortized, payment reduced over $200/mo
    (In the 'planning' stage, to file ch. 13 if/when we have to.)

    Comment


    • #3
      Checked your other posts - see you're over median. So your plan will be 60 months. Unless you can propose a plan to pay back 100%. So I'm confused by your atty's comment that changing your car payment can make your plan take longer? (Unless it was a general statement and he was not basing it on the details of your case.) Can't go longer than 60.

      I also saw your concerns about higher than norm vehicle expenses. Can't do anything about high insurance, but OUCH! I never would have realized a deer incident would be held against you. As for the gas expense - I can relate, I drive 600 miles a week minimum. Hoping to buy a used Prius before I file.
      Get mortgage modified: DONE! 7 months of back interest payments amortized, payment reduced over $200/mo
      (In the 'planning' stage, to file ch. 13 if/when we have to.)

      Comment


      • #4
        Thanks SMinGA. I'm actually double the median and it's unlikely I'd fit into a 36 month plan, even paying 100%. He doesn't have all the details yet since I'm still working on filling out the forms for him. Yes, there will be a $3000 fee for him included in the plan.

        I understand your advice on the rate, that makes sense. How about the total payment amount - are there some guidelines for what is acceptable? Am I wrong to think that buying a $40,000 Audi at $800/mo two months before filing might raise some eyebrows?

        I'm stopping my the dealer later today to pick up my car from service. I'm thinking of just sitting down with them and saying that as FYI before they pull, I have an interesting financial situation, going through a divorce, got behind on some cc payments but my attorney is working out arrangements with them and I'd like to take a shot at applying with my past good history with them in mind. Figure it can't hurt...

        Comment


        • #5
          I have the suggestion of keeping it at (or near) the $489 vehicle payment allowance that is used on the means test. My attorney suggests (not an abslute requirement) that 3 months pass between vehicle purchase & filing. He said then that even if the lender complains about having their rate reduced (if its to be paid in the plan) then they are bound to lose the objection. In my district, vehicles paid in a plan get 5-6% APR. If you are able to commit a fairly high payback % despite a higher than normal car payment, the car payment itself might not be questioned. Such as if you will pay back 75% with a $650 car payment, it does not look quite as bad as paying back 10% with a $650 car payment. Though that may depend on the trustee of course.

          That info/story would be reasonable, I think. Let them know you're now 'credit challenged' and they will have some idea of what they're dealing with? I imagine they have different lenders they go to for different credit situations.

          Originally posted by krautrocket View Post
          Thanks SMinGA. I'm actually double the median and it's unlikely I'd fit into a 36 month plan, even paying 100%. He doesn't have all the details yet since I'm still working on filling out the forms for him. Yes, there will be a $3000 fee for him included in the plan.

          I understand your advice on the rate, that makes sense. How about the total payment amount - are there some guidelines for what is acceptable? Am I wrong to think that buying a $40,000 Audi at $800/mo two months before filing might raise some eyebrows?

          I'm stopping my the dealer later today to pick up my car from service. I'm thinking of just sitting down with them and saying that as FYI before they pull, I have an interesting financial situation, going through a divorce, got behind on some cc payments but my attorney is working out arrangements with them and I'd like to take a shot at applying with my past good history with them in mind. Figure it can't hurt...
          Get mortgage modified: DONE! 7 months of back interest payments amortized, payment reduced over $200/mo
          (In the 'planning' stage, to file ch. 13 if/when we have to.)

          Comment


          • #6
            All good points from SMinGA.

            You definitely want a good poker face, these guys have seen everything so nothing will faze them. You may not be able to finance 100%, maybe 90%.

            You could let them sell you an extended warranty to bump up the price as long as you're roughly within the IRS limits for your district.

            They may also use this as a way to bump their profit and buy down a 1/2 point on the APR, but this is useless to you if you get the rate adjusted per In Re: Till.
            filed chapter 13..confirmed...converted to chapter 7...DISCHARGED!

            Comment


            • #7
              Originally posted by catleg View Post
              You could let them sell you an extended warranty to bump up the price as long as you're roughly within the IRS limits for your district.
              This is good advice that flies against what most of us are typically taught as good consumers (i.e. never buy exteneded warranties). But since (for most of us anyway) all this does is offset what our unsecured creditors will get, it is a smart move.

              I added a service contract to the car when we purchased one shortly before filing and my only regret is that I didn't get a higher mileage level of coverage. I am still under the $489 per month after reducing the interest rate to Till. The only ones this impacts is my unsecured creditors, plus I get some extra protection in case of a major vehicle issue.

              Comment


              • #8
                Thanks all for the great advice, what an awesome community! I bet I'll have a hard time getting under the $489 on a purchase, but I'll see what I can do and ask my attorney before pulling the trigger. A lease is an option, but I have a 100 mi commute per day, so I'd be over mileage and required to purchase the vehicle 3 or 4 yrs into the plan. (to avoid paying outrageous fees) Definitely seems like the counter-intutive logic that higher price is better applies - as long as it's in alignment with the guidelines and district practices. I'll let you all know how it goes. Cheers.

                Comment


                • #9
                  One avenue - not the moral high road - would be to take the lease and 4 years into your plan modify the plan to surrender the car and include the lease deficiency! Then you'd still need wheels for the rest of your plan.
                  Get mortgage modified: DONE! 7 months of back interest payments amortized, payment reduced over $200/mo
                  (In the 'planning' stage, to file ch. 13 if/when we have to.)

                  Comment


                  • #10
                    Originally posted by SMinGA View Post
                    One avenue - not the moral high road - would be to take the lease and 4 years into your plan modify the plan to surrender the car and include the lease deficiency! Then you'd still need wheels for the rest of your plan.
                    Tempting, but I don't think I can bring myself to that. Plus chances are I would like the car and want to keep it. I'm going to shoot for a purchase and see what kind of numbers they come back with. I suppose requesting to purchase the car that I am already leasing should not be much of a problem with the trustee. I'll provide the options to the lawyer and see what the things. Thanks again all!

                    Comment


                    • #11
                      Originally posted by krautrocket View Post
                      ! I bet I'll have a hard time getting under the $489 on a purchase, but I'll see what I can do and ask my attorney before pulling the trigger.
                      Well, back to your earlier post about a new $40,000 car with an $800 payment... In all honesty, maybe a new Audi is not where you can reasonably end up. Maybe another make or perhaps a low mileage used vehicle that will last the duration of your plan.

                      Comment


                      • #12
                        Me and my husband are in the process of filing in late September. The lease on my husbands car was up this August and he paid $525 a month. As of yesterday we were able to finance the same car for $549 a month for 72 months although we will be paying a lot for this vehicle in the long run, my husband has a car which is essential for his job. i let my attorney know and he said great so hopefully we will have no eyebrows raised. our credit has kind of tanked so we couldn't get much cheaper than that I thought 9.9% wasn't bad

                        Comment


                        • #13
                          Audi came back with approval at 8%, but here's the kicker - minimum $7k down. Since i have negative equity in my current vehicle and they can only finance 110%.

                          NoTomatoCan, yes you are right on the money. I was using an exaggerated example, wouldn't have gone that far, but agree with you. That's not in the karmic cards now.

                          I could shop around for used CPO but not optimistic given Audi was probably my best shot and the finance guy said my fico in the mid 500s (apparently they are all still showing as 'payed as agreed but high ratio...) would normally disqualify me but my perfect 10+ yr history enabled him to "go to bat" Could be total B.S.

                          Thinking I will just keep the current car and carefully budget maitenance and repairs carefully into the plan. $7k could pay for a lot of repairs ;-)

                          Comment


                          • #14
                            I am partial to my "older" car as well now. Especially after the down payments they require for me to even get a loan. My car is paid for, but the cost of repairs are less then what the cost of the car payment would be. I have my own preferences in vehicles, but all are out of my price range right now. I guess my old Lexus will have to make it a couple of more years. Lucky for me it is a model that was built prior to all the recalls. I think if I were to buy another Lexus I will add on every warranty i can think of onto the car. Simply because they are not built like they used to be.

                            Another thing you may want to look at is a Audi that has about 20K in miles on it. If it is only a year or two old the price will be easier to finance, plus you can still go 60 months on the financing, without having to out 7K down. When I checked into leasing a car 2 years ago my credit was not horrible, 690, and the finance company would not even lease a car to me because I was under 725 on my credit rating. I wonder if they would laugh now since I have just completed BK and prior to be discharged I was in the low 500's.
                            Chapter 7 filed on 4/23/2010
                            341 meeting on 5/28/2010
                            Discharged on 8/19/2010

                            Comment


                            • #15
                              Can you purchase another extended warranty for your current car? I have a family member who bought a very old van with a ton of miles, got an extended warranty (top of the line) and they haven't had to pay anything for the many repairs it needed.

                              Or extend your current warranty. Sometimes they will do that.

                              Comment

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