Paid off cars when filing a chap 13

[253BK]

Hello everyone I have been getting very close to filing with our attorney but thought of a question today so I thought I would ask on here since I couldnt get ahold of the attorney...... Figures...

Anyways I owned a car transport company and last year when the business was doing well I bought a truck with cash we had and that truck is worth about 35K and we own it outright! What I was hoping to do is sell it or trade in and get 2 good cars to make it through a 5 yr plan without much problems to worry about!

My question is how do they look at cars that are paid off? Is it something that if they are worth say 35K you pay in 35K to your creditors? Monthly we have about 200$ left after our mortgage and proposed payment to the trustee and if it werent for the paid off truck we would be filing chap 7...

Anyone else have this kind of situation??? PLease advise if you have time

[lrprn]

My question is how do they look at cars that are paid off?

One thing for sure, no state has anything close to $35K as an auto exemption.

If you want to keep this car after filing Ch 13, since it's paid in full and there's no loan, then you are going to have to pay the trustee the difference between the car's current market value and your state's auto exemption + any wild card or other related exemption value you can use (if any).

Ch 7 isn't going to work out any better in your favor either. The same thing is going to happen if you want to keep the car.

Buying two cars for cash won't help you either - you'll just have two cars paid in full that you have to pay the trustee to keep rather than one.

Sorry the news isn't better.

[253BK]

Well here is another angle I can work on this all! I can sell my truck say I get 35K my hosue is behind about 18K and I owe the IRS 10K I could pay them both off and buy a cheaper car with the differance and file chap 7

My only thought there is what is the car breaks down I have to buy another one at a bad intrest rate which makes for a big car payment...

OR I stick with the chap 13 and buy to newer cars and pay the trustee the payment instead...

What would you do I feel alot safer going the 13 route with newer cars but 7 would be nice cuase it is just over right away!!!

[woeisme]

talk to an attorney before you sell the car and use it to pay other bills. there's such a thing as preferential transfer, where you pay one creditor over the others, and the trustee will "undo" these kinds of payments in many cases. Not so sure about yours because what you're looking to pay is priority debt (secured loan on house and non-dischargeable IRS debt I presume?) so may be allowed??? Definitely want an attorney's opinion on that WAAYYY before you try it though. Most will give an initial BK meeting for free, although that can vary.