Car Payment in Plan Question

[UpsideDownMI]

I have tried to get financing for a new car with no luck (approved at 25%). So I have decided to keep my high mileage vehicle and list a repair expense on schedule J. However, my car will be paid off in almost 6 months. To keep my payment the same throughout the length of my plan I was thinking of having my car paid thru my plan. My question is if I do this can I direct the trustee to make my car payments as scheduled so that it is still paid off in 6 months? That would allow my lien to be released and to lower my insurance to "plpd". If I can't do this, I will pay outside of my plan and propose that my payment increase when my car is paid off.

[rrockinggramma]

In Michigan the order of payment after confirmation is lawyer first (paid in full) then priority debt and secured debt and then unsecured debt. My car was paid off in full right after the attorney. The trustee sent them my entire payment each month (556.60) minus his fee. I owed 3000 so it was paid off quick. And I got the title on it almost immediately after payoff.

That high interest is a killer no doubt but you could get the car, include it in the plan and let the trustee pay the finance company the fixed interest rate set by the trustee. You can't cram it down, but the finance company can only file for principal owed, no interest or fees. Soooo the choice is yours,
get the 25 percent interest car that won't break down, include it in the plan (my MI trustee paid 6 percent interest on secured debt at the time) or go the route you are looking to take. I do not think a "repair" category will fly. However if your attorney is good, other expenses can be "padded" to get it in there.

[UpsideDownMI]

Thanks for the input! The approval comes with a long list of requirements. I would need to put 3k down (don't have) and the loan can't exceed wholesale value of the car. That will be near impossible considering the car must be bought through a dealer. On top of that I would also have to payoff or trade in my car.

As for the repair expense, if it is challenged I would argue that it is in the best interests of my unsecured creditors as it would net them more than $300 per month more than they would receive if I chose to replace it with something new. I do have legitimate repairs that are needed on my car. It needs a new radiator and brakes. The windshield is also severly cracked. Maybe I should get some estimates to support my case.

[rrockinggramma]

well I don't think the trustee will allow it as a "monthly expense" on your budget but there are other ways to get it into your budget by upping other expenses to give you wiggle room. Depending on your trustee, I don't think that "car repair expense" will be allowed as a monthly budget item.

[klandsb]

I find that so interesting that your state actually pays so & so first , then so & so and then so & so... I am going to check with my attorney on that..I live in PA but I was thinking if its included in my BK then I would be paying for a car thats 10 yrs old by the time my 5 yrs is up... Also, I have read that sometimes your payments dont get in on time (due date) therefore your showing as late ??? Was this the case for you ???

[rrockinggramma]

no because the trustee always paid big chunks on the secured debt. I had the car and the IRS, no mortgage. I would want to keep the mortgage outside of the plan so I could control that payment. No late payments needed there.

But in BK all accounts are "frozen" anyway and will report to the credit bureau as "included in wage earner plan" with no payments showing monthly.