Options for car prior to filing when there's equity

[MbMan79]

Hi,

Any guidance would be great: I own my jeep and owe $700 more. My plan is to pay it off. The car is now worth $10,000. My lawyer said I would likely lose my car when I file for chapter seven. What are my options? Should I trade it in for something new and buy or lease? My lawyer is checking with other lawyers on the best course of action as he said the equity at trade in may be a problem. I live in Illinois and definetly need a reliable car to keep my job.

Thanks!

[PoorNow]

My car was worth $18k and I had to sell it, then use the cash to buy a car that is exempt (worth $5k or less in my state) I was able to use the rest of the cash to pay some medical bills, buy some other exempt items and basically live off the rest of the money since we hadnt been making any money at the time. It was no problem at all. The trustee didnt even ask us about the sale of the car or how we spent the money. (Id saved a ton of reciepts so I could show it) Im no sure how it would work to trade in the car for something else though. If you traded it in for something else, you'd still have the equity which is probaby more than your state allows for an exemption.

[MbMan79]

Is selling it and use the allowable equity for a lease the best thing?

[tcreegan]

Hello Mbman,

Ill. vehilce exemption amount is 2,400
Ill. has a 2,000 wildcard exemption amt. that could be applied for $4,400

Anything above 4400 is asset the trustee can claim for the estate.
Trustee claims car, sell car at auction, you get 2400 dollars exemption and the rest pays your creditors.

You sell the car. Use $4400 to buy another car. Spend the rest on utilities, medical, rent, car repairs, stock up on laundry soap, food, etc. Just don't buy any high-end electronics, firearms, high-tech camping gear, jewelery, fur coats, or other luxury items.

You sell the car. Use the $4400 as a down payment, finance the rest. Reaffirm the car loan in the BK. Essentially you and the lender ink a new contract. Usually with the same terms, but not always.

You sell the car. Use the $4400 as down payment, finance the rest.
Check "reaffirm" on the BK paperwork, but never sit down and ink a new contract. Keep making payment on time, lender never says anything. You are not legally liable for the debt and can walk away anytime.

In the last two scenarios, say you sold your car for 10000. subtract 4400 and you have 5600 in your pocket. That needs to get spent bf the BK

Hope this helps,

Tom in Colo