Can I really increase car expense ?

[NEWBIE911]

Hi - I am in NJ. I'm married and filling jointly - we have two cars both in my name equalling approx 510/mo for both. My wife received an approval for a loan and I am wondering if it's a good idea to trade in a car in my name for a car in her name. The expense will go up but being the purchase would be so recent how would the trustee look at it? It would add an additional 200/mo to our car expenses.

I'm expecting to file next week.

[justbroke]

Hi - I am in NJ. I'm married and filling jointly - we have two cars both in my name equalling approx 510/mo for both. My wife received an approval for a loan and I am wondering if it's a good idea to trade in a car in my name for a car in her name. The expense will go up but being the purchase would be so recent how would the trustee look at it? It would add an additional 200/mo to our car expenses.

I'm expecting to file next week.

Well, you get the National Standard (allowance) of $489 per car. They key is, how old are those cars, and will they last through your Chapter 13?

Also, I did something else. I am actually benefiting from the difference between the allowance and the actual monthly cost of the loan! On both my cars, I'm getting about $200/month in extra 'disposable" income, that's not going to the lender. This is giving me a good cushion in my Chapter 13 Plan.

One of my cars is a 2007, the other a 2003. However, the 2003 has only 30K miles on it, and really goes nowhere because it's a big V8 AWD SUV -- read, gas guzzler! I filled up my Focus yesterday for $23.00 for the first time in 2 years. That was nice.

The key for you will be whether the cars will make it through the Plan period. If not, you may want to replace one. Do not exceed the $489/month or it will eat into your other living expenses.

BTW, reads like the new car would be $400 or so a month all by itself. That's okay, but... do you need that much car?

[NEWBIE911]

Well, you get the National Standard (allowance) of $489 per car. They key is, how old are those cars, and will they last through your Chapter 13?

Also, I did something else. I am actually benefiting from the difference between the allowance and the actual monthly cost of the loan! On both my cars, I'm getting about $200/month in extra 'disposable" income, that's not going to the lender. This is giving me a good cushion in my Chapter 13 Plan.

One of my cars is a 2007, the other a 2003. However, the 2003 has only 30K miles on it, and really goes nowhere because it's a big V8 AWD SUV -- read, gas guzzler! I filled up my Focus yesterday for $23.00 for the first time in 2 years. That was nice.

The key for you will be whether the cars will make it through the Plan period. If not, you may want to replace one. Do not exceed the $489/month or it will eat into your other living expenses.

BTW, reads like the new car would be $400 or so a month all by itself. That's okay, but... do you need that much car?

Thanks - both cars would last through the plan. One is an 07 Honda - the other an 06 honda. The 06 honda was kind of a toy for me - 6 speed coupe that my wife can not drive. I was thinking to trade that in for maybe a 4 door - approx 410/mo. So, I guess the court will see an 06 car being traded in for a newer car - that may be frowned upon?

[justbroke]

Thanks - both cars would last through the plan. One is an 07 Honda - the other an 06 honda. The 06 honda was kind of a toy for me - 6 speed coupe that my wife can not drive. I was thinking to trade that in for maybe a 4 door - approx 410/mo. So, I guess the court will see an 06 car being traded in for a newer car - that may be frowned upon?

I don't think it would be necessarily frowned upon... the question is... is it practical?

[NEWBIE911]

Thanks - both cars would last through the plan. One is an 07 Honda - the other an 06 honda. The 06 honda was kind of a toy for me - 6 speed coupe that my wife can not drive. I was thinking to trade that in for maybe a 4 door - approx 410/mo. So, I guess the court will see an 06 car being traded in for a newer car - that may be frowned upon?

wait a minute - are you saying the difference between 489x2 and the loan amounts gets applied somewhere?

[NEWBIE911]

I don't think it would be necessarily frowned upon... the question is... is it practical?

the car decision would be more practical - is that what you mean?

[FranksMom]

As long as you fall within the allowance, you should be ok... and as long as you haven't already filed (or you would need permission from the trustee or judge first). The question is, how does the payment work for you?

[NEWBIE911]

As long as you fall within the allowance, you should be ok... and as long as you haven't already filed (or you would need permission from the trustee or judge first). The question is, how does the payment work for you?

It's hard to say how the payment would work as I have no idea what my plan payment will be. So regardless if I have a 200/mo car or a 400/mo payment my plan "is what it is" as far as payment? Or would the added expense of a higher payment be factored in to my secured expenses? - I think what I don't understand. In otherwords, will the judge / trustee say to new of a purchase and not let me factor it in?

[justbroke]

The question is, how does the payment work for you?)

Exactly what I meant!

wait a minute - are you saying the difference between 489x2 and the loan amounts gets applied somewhere?

In a Chapter 13, and depending on whether your Disposable Monthly Income (DMI) is calculated based on a formula, or actual expenses, you get IRS Allowances.

The IRS Allowances for cars is $489 per car, nationally. (You also get a vehicle ownership of $470/month I think for New Jersey on top of that.) So, if you have two cars, you get $489x2 ($978/month), plus another $470/month for vehicle allowance.

So, what I'm talking about the "extra cash"... you have to understand how the allowance works. The allowance is up to $489 based on what your actual cost of ownership is. If your loan is $289/month, then your allowance is $200 (that's $489 minus $289 = $200). that's because, further down on the Form, line 47 or 48, you'll have the cost of paying that car at $289/month.

That $200 I mention is like extra money in your pocket for expenses. if you got a $500/month car, then you'd not get "extra" money in your budget AND you'd have to take $11/month out of your budget to pay for it.

Does that help or hurt?

[NEWBIE911]

Exactly what I meant!

In a Chapter 13, and depending on whether your Disposable Monthly Income (DMI) is calculated based on a formula, or actual expenses, you get IRS Allowances.

The IRS Allowances for cars is $489 per car, nationally. (You also get a vehicle ownership of $470/month I think for New Jersey on top of that.) So, if you have two cars, you get $489x2 ($978/month), plus another $470/month for vehicle allowance.

So, what I'm talking about the "extra cash"... you have to understand how the allowance works. The allowance is up to $489 based on what your actual cost of ownership is. If your loan is $289/month, then your allowance is $200 (that's $489 minus $289 = $200). that's because, further down on the Form, line 47 or 48, you'll have the cost of paying that car at $289/month.

That $200 I mention is like extra money in your pocket for expenses. if you got a $500/month car, then you'd not get "extra" money in your budget AND you'd have to take $11/month out of your budget to pay for it.

Does that help or hurt?

I have to apologize - for still being confused - Simply speaking, if I have lets say 500 in disposable income before my car expense goes up - I buy a car - and my disposable income is now 300 - is that helpful in paying unsecured creditors back? Yes, a 289/mo payment is better budget wide, but wouldn't a 450/mo payment help in terms of reducing my plan payment to the unsecured creditors?

[justbroke]

I have to apologize - for still being confused - Simply speaking, if I have lets say 500 in disposable income before my car expense goes up - I buy a car - and my disposable income is now 300 - is that helpful in paying unsecured creditors back? Yes, a 289/mo payment is better budget wide, but wouldn't a 450/mo payment help in terms of reducing my plan payment to the unsecured creditors?

Not necessarily. It's all about STRATEGY and NEED.

Do you need a new car? If not, you could have $200 in your pocket to spend... rather than sending to a CREDITOR. (Even though you get a $489 car, some creditor is getting your money.)

It's all about strategy and planning. You want the BEST budget you can with MORE money going into your POCKET. Not to a creditor.

[NEWBIE911]

Not necessarily. It's all about STRATEGY and NEED.

Do you need a new car? If not, you could have $200 in your pocket to spend... rather than sending to a CREDITOR. (Even though you get a $489 car, some creditor is getting your money.)

It's all about strategy and planning. You want the BEST budget you can with MORE money going into your POCKET. Not to a creditor.

OK - I didn't know that allowance existed - no mention from my lawyer either. Geez - I may need to fire this guy. Thanks for your patience

[justbroke]

OK - I didn't know that allowance existed - no mention from my lawyer either. Geez - I may need to fire this guy. Thanks for your patience

Well, the lawyer doesn't get into these types of details, usually. They should be trying to get you the best budget in your Chapter 13 Plan.