Some Questions for the group.

[tfabian]

Here is our situation. After much deliberation, my wife and I have filed for Ch. 13. Our creditors' meeting is set up for 1/18.07. I have mainly two questions.

First, We have to purchase a vehicle, and will likely be approved to spend up to $300 per month. We will be making trustee payments for 5 years. My wife and I both have credit scores in the 500 range (gulp). We have 4 young children and need a larger vehicle. How feasible is it that we will be able to get a loan? We are looking at putting down around 5K, looking at vehicles around 20K, to finance around 12-14K after price negotiations.

Second, as I mentioned, we will be in this thing for 5 years. Can I get out early? As it structured now, I will NOT be paying back 100% of my debt. Certain things like furniture are factored in at Fair Market Value. To get out early will I have to pay 100%?

All help is greatly appreciated!

[aa06a47]

Here is our situation. After much deliberation, my wife and I have filed for Ch. 13. Our creditors' meeting is set up for 1/18.07. I have mainly two questions. Congratulations on your decision to file and to get on with life. All of us who have been through it know the hell of this decision, and most have felt that "relief" once we did file.

First, We have to purchase a vehicle, and will likely be approved to spend up to $300 per month. We will be making trustee payments for 5 years. My wife and I both have credit scores in the 500 range (gulp). We have 4 young children and need a larger vehicle. How feasible is it that we will be able to get a loan? We are looking at putting down around 5K, looking at vehicles around 20K, to finance around 12-14K after price negotiations. Might be tough while in a chapter 13 to get a loan. Question, you seem to 5 k for a downpayment just after filing bk. That seems like alot to have for a downpayment after filing and before your 341 meeting..??? If your able to keep that money without the trustee sloppering all over it, I would put as little down as possible on a vehical and save that for unexpected expenses. After all, if you get a loan, and the judge approves the payment, that money is taken from disposible income and you end up paying back less to unsecured creditors. Good luck on the loan.

Second, as I mentioned, we will be in this thing for 5 years. Can I get out early? As it structured now, I will NOT be paying back 100% of my debt. Certain things like furniture are factored in at Fair Market Value. To get out early will I have to pay 100%? THe general rule is you pay the entire time or 100%. There is some debate on if you can buy out after 36 months in the new law (old law was no issue) without 100% payback. I figure we will be seeing some test cases in a couple of years to find this very thing out.

All help is greatly appreciated!

See above

[HHM]

Regarding the car, I think you need to set your price target lower, even with a $5K down payment, with your credit and only $300 month, you will be hard pressed to get a car that cost $20K, plain and simple. Even if you could finance a used car at 60 months (the market rate right now is 7.33%, and you won't get the market rate) the payment would come in at $299.36 if you financed $15,000. And we havn't even factored in sales tax, title, fees etc.

Thus, I think you should lower your price target for a car to about $14K-$16K, and financing no more than $10K-$12K. The other problem is, most finance companies won't touch you until you have been in your chapter 13 for one year. But, it's not impossible.

[tfabian]

Thank you for the quick response. My wife and I usually get a tax return of around 10K per year. I am hopeful that we will be able to keep half that to assist with a vehicle purchase. I have a 2005 Chrysler Van that I am giving back. It has 103,000 miles on it and needs around 5-6K in repairs. I deliberated on getting it fixed, but it has been such a bad vehicle, that I would rather cut my losses and buy something else with less miles and better built....this thing is a heap of garbage. Our other vehicle is a Mazda that barely fits the whole family. When I give the Van up in the next couple weeks, I fear I may regret it if I can't get approved on something else.

[lrprn]

aa06a47 has given you some good suggestions, tfabian. I'll add that since you've filed Ch 13, your trustee MUST give permission for you to take on new debt of any kind, including purchase of a new car. If you haven't already, be sure to talk to your lawyer before doing anything so he/she can notify the trustee of your intentions and get permission for you to proceed.

You said you are likely to be approved for $300/month payments. You also said you were looking for cars up to $20K. Given that your credit scores are so low, if you can find a lender who will overlook that you are in Ch 13, you will be dealing with sub-prime lenders. You will not get favorable interest rates, so you will end up upside down on any car you purchase very quickly. If I were you, I'd be looking for the most reliable, oldest car you can find. I don't know if you can stay under $300/month in anything very new. Not optimal, but sometimes life doesn't wait for the best circumstances. Be sure to shop around extensively to get the best lender and car deal possible.

Also with a new car payment, your lawyer may need to amend your Ch 13 plan. Since that involves amending forms and filing a new plan with the courts, this often costs additional lawyer fees beyond your original payment to file...another thing to discuss with your lawyer.

Hope you are able to find a car purchase that doesn't strap you too much. Please keep us posted on your progress and good luck!

[tfabian]

The attorney has put in for the $300 per month in the plan. What is an interest rate that can be expected 11, 12, 15, 20%. If something has a list price of 20K, it can be expected to sell for around 17-18K. My goal is to put the 5K down, and finance 12-13K. I was figure on around 12% interest, is this out of line? Can the trustee tell me to keep to Chrysler Van? I will keep you all posted. Thanks Again for your assistance.

[lrprn]

With your credit scores, you are likely looking at an interest rate between 14-18% with a sub-prime lender. Do you know if the bankruptcy has hit your credit record yet? If it hasn't, then I would try very hard find a lender as quickly as possible before it does.

I'm trying to understand why you are set on such an expensive, newer car. That's no guarantee of reliability as you discovered with your 2005 Chrysler. A lemon is a lemon, no matter what its age. If you search for a less expensive car that has an excellent reliability record (check Edmunds.com) and have a good mechanic check the car over before you buy it, you could end up borrowing thousands less for a much more reliable car.

As HHM already noted, since you haven't been in Ch 13 for at least a year, that lowers the number of potential sub-prime lenders who will take a chance on you. The lower the loan amount needed, the greater your chances of finding that sub-prime lender who will loan to you before you've even had your 341.

One last question....was there some reason you decided not to get a new car before you filed?

[tfabian]

The main reason why I didn't look at getting something else would be because we would have to trade in 2005 Van. The van was bought in June 2004, and we would be way upside down, especially in light of the necessary repairs. We would likely get around 4-6K on it and owe around 13K. I'm not that hung up on getting something that new. I just need something Big and something Reliable. If buying used, I would prefer to get an SUV type vehicle because I feel that they are better built than minvans. In addition, they are easier to work on if something go wrong. Whatever it is I get, it needs to have 3 rows of seating. My options are somewhat limited. Ford Explorers newer than 2002, Expeditions, Suburbans etc. I would rather have a 2000 with 40000 miles than a 2004 with 85000. One more question, would the $300 get paid directly from the trustee to the auto lender, or directly from us?

[aa06a47]

I would have your attorney put in a higher amount, like 400. You would generally pay a secured lender directly unless there are arrears to be paid.

[SinkingFast]

I second Aa's suggestion to have your attny list a higher dollar amount. If the attny can get it thru, you'll more likely get what you need, vehicle wise.

When people have existing car loans that are not in arrears, generally payments are made direct, to the Lender, outside of the Ch 13 plan.

In your case, you're looking to take on a new loan,........... You might be better off to tell the Trustee and the Lender you want the payments included in your plan. Lenders get some form of assurance that your payments will be made in a timely manner and the Trustee will know you won't be late. May be the thing to do to get you the loan and the vehicle you need.

[tfabian]

I would have your attorney put in a higher amount, like 400. You would generally pay a secured lender directly unless there are arrears to be paid.

I was told that $300 was the limit. This isn't true? Another suggestion was to try and secure a loan before the BK hits my credit reports. How possible is this, and will that be a bad thing if the trustee discovers it? It sort of seems risky to me. I guess what I am wondering though is this, some of the dealers offer a "buy here pay here" type program that allows one to get a vehicke when financing is not possible. If I were to buy a car and had to make $400 per month payments, is this something that can come directly from me or does it have to be paid to the lender via the trustee?

Thanks!

[lrprn]

I was told that $300 was the limit. This isn't true?

$300/month is likely what your lawyer thinks is all your trustee will tolerate. This can vary widely from trustee to trustee and bankruptcy district to bankruptcy district.

Another suggestion was to try and secure a loan before the BK hits my credit reports. How possible is this, and will that be a bad thing if the trustee discovers it? It sort of seems risky to me.

Actually I suggested that. I realized going back through the posts that although I said in my first post to you that your trustee has to pre-approve any financial deal that requires you to take on new debt like this car loan, I didn't repeat that in my second post with that suggestion. You are absolutely right - it would be very risky to try to slip a new car loan past your trustee. Allow me say it again - you MUST have trustee approval before proceeding to take on any new debt like a car loan after filing. Apologies for the confusion.

[helpless]

If you have already filed, it is already on your credit reports. Doesn't take long for those to surface. It was on my DH two days after we filed.

[aa06a47]

I was told that $300 was the limit. This isn't true?
Thanks!

Very subjective, but whatever the amount, it will have to be approved by the judge. Here is the deal.....in my opinion only,....since you currently are not paying $300/month, chances are that you will pay the trustee that $300/month until you get a vehical....and that money will go to the creditors. If you can slide the $300/month past the trustee without actually having the payment, it might be wise to take that 300 each month and put in a savings account until you can pay cash for the vehical.

Legally, I don't think there is a 300/month limit in the code. However, local rules and judges make there own rules on things like that when it is left open. I hear some bk judges in California don't bat an eye at an $800/month car payment, while a bk judge in Missouri pukes over a 500/month car payment.