Meeting with attorney in the morning

[DCrews1]

i feel behind on house payments and car payments fortunately nothing has been repoed or foreclosed on yet. I received my tax refund yesterday about $4200. At this point the only way saving my home and vehicles are to file 13. Problem is we owe my finances parents $500 and my father $500 they are both disabled and on very low fixed income. Can I pay those small amounts to them and be ok or would that be flagged do you think? The only attorney in this area doesn't do a very good job of answering questions. Also how likely is it to get a cram down? I have two vehicles both upside down and I've been laying on them about 3 years. One is my vehicle for work and one is consigned with my fiance to get my son to school and doctors appts. toyota and capital one auto cram down friendly? Thanks for all your help.0

[justbroke]

It's a super red flag to pay an (unsecured) insider, especially someone who is related to you, over other unsecured creditors. This is known as a preferential transfer and the Trustee can claw the money back from that relative/friend. It could even be a fraudulent transfer if you did this specifically to hide money from the Trustee (I don't think you're trying to hide it, just pay them).

A cramdown on a vehicle is super easy as the caselaw is now pretty thorough. So long as the vehicle was financed more than 910 days ago, or you had refinanced it with a different lender anytime after purchase, you can use the cramdown provisions in Chapter 13. it doesn't matter if the lender is cramdown friendly; none are, as they are forced to either "eat steel" or receive less value for their loans. More than likely as soon as you file, the loans will be assigned to a company like Ascension Capital that deal specifically with bankruptcies and auto loans.

[DCrews1]

Thanks for the quick response. I feel bad not paying them but I'd feel worse having the more e.g. Taken back from them by the court. What kind of interest rate is normal when you cram down? I've read prime and I've read contract rate?

[justbroke]

Do you have a guidebook such as NoLo's guide to filing Chapter 7 bankruptcy? It would help alot, but we can answer a bunch of these questions as well.

When you cramdown, or even just having a vehicle in a Chapter 13, you can change the interest rate to what's known as the Till Rate. Till is the prime lending rate plus a "risk" factor of 100-300 points (simply 1-3%). SO if the prime lending rate is 3%, then most will use a Till Rate of 5% (3% + a 2% risk rate). I used a Till Rate of 4% of one of mine and the creditor didn't complain. Most, however, use risk factor of 2%.

The prime lending rate today (according to the WSJ) is 3.75%. So the Till Rate would be 3.75% - 6.75% with the average being 5.75%.

In my experience and what I have witnessed in court, has been that the only time contract rate would apply is a.) contract rate is lower than Till, or b.) you purchased the vehicle really close to filing of the bankruptcy. For a cramdown, this won't matter because a cramdown requires a so-called "910-vehicle" anyhow so that's 2.5 years from filing (or a refinance). Vehicle lender will typically balk anyhow and try to not have the rate changed, but for cramdowns it's defacto going to be prime plus risk. For newer vehicles, the lender will complain but they won't get far unless it was a vehicle "just" purchased before filing (unless your attorney, or you, just don't want to fight). I had these specific issues in my case, and was Pro Se.

(Interestingly some creditors will argue that you pay Till when Till is higher than the contract rate. Yes, it gets creative, especially when the original contract is on a 0% interest loan!)

I "won" the argument by offering 5% at the time although my rate was 14% before filing; it was scheduled for hearing, but never went to hearing (on my motion to determined status and cramdown).

[DCrews1]

Great info I really appreciate it. I have actually read the Nolo guide a couple times and did have a successful chapter 7 pro se in 2010. But life throws you curves and as much I feel terrible doing it it's something I have to do to. Once again thanks very much.