top Ad Widget

Collapse

Announcement

Collapse
No announcement yet.

Lexus and Ch 13

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Lexus and Ch 13

    I bought my wife a new Lexus last fall and am now considering filing Bankrupcy for a number of reasons (not just because of the Lexus). I have spoken to a lawyer and he said my income was to high for a Ch7. Based on Kelly Blue book, I have about $4K equity in the Lexus and am current on the payment. I did the Nolo means test and it looks like I can afford all my secured debt (house, two cars and Ethan Allen acct), and payback about half my unsecured debt in the 5 year repayment plan. So, has anybody had a "Luxury" car taken from them in a chapter 13 plan even though they could afford it, just to give more money to an unsecured creditor?

    #2
    Is it over the IRS standard payment of $496? If not, then you're fine. If so and it's your only car payment, you may still be fine. However, if you have 2 car payments that total more than $992/mo ($496 x 2), then you may have an issue.
    Filed Chapter 13 on 2-28-10. 341 completed 4/14/10. Confirmed 5/14/10. Lien strip granted 2/2/11
    0% payback to unsecured creditors, 56 payments down, 4 to go....

    Comment


      #3
      First, the statement "... a lawyer... said my income was to high for a Ch7", is absolutely false! Whether you qualify to receive a discharge in a Chapter 7 case, is not based at all on income. It's based on your ability to pay creditors. I would find another attorney.

      Having wrote that, you can actually keep a luxury car in a Chapter 13, but you can't exceed the monthly allowance. It's a little complex, but it goes like this. There is an "IRS" standard deduction for ownership of a car. That amount is currently $496/month for a single car. The problem comes because you get an expense allowance of the Payment - $496... in addition to being able to claim the actual car payment.

      It gets more complex because technically, a car loan is automatically "refinanced" (re-amortized) during a Chapter 13. For this example, we'll just keep it simple and say that car is work $36,000 and you're in a 60 month plan; keeping the payment at $600/month. So, if the payment was $600/month, the allowance would be $0.00, but you'd get the expense of $600 a month -- because all secured debt is granted an allowance equal to the current payment. The Trustee will complain because the payment exceeds the IRS allowance of $496/month. You fix this by throwing another $104/month into the payments to unsecured creditors.

      Unfortunately, paying an extra $104/month into the unsecured creditor pull could mean $104 coming out of the food or other allowances that you have. A Chapter 13 is not a walk in the park at all. It's about managing a budget, and you'd be $104 in the hole each month, from the start.

      Would I do it? No. However, should you decide to do this, you will need to be sure that your Attorney absolutely works hard on your plan to make sure nothing is left out of your budget! This certainly would make your
      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog

      Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

      Comment


        #4
        Thanks Momofthree and Justbroke. I have two cars, the Lexus at $570/month and a Mazda at $440/Mo. Looking at the IRS standard mentioned, are they likely to combine the two and double the IRS standard, whereby showing me only $14 over? Or will they look at each vehicle and payment individually?

        Comment


          #5
          It depends on your trustee. Your attorney will be your best resource as to what will fly and what won't. You will probably be okay since you're so close to the IRS limit total for 2 cars, but some trustees are more money hungry than others...
          Filed Chapter 13 on 2-28-10. 341 completed 4/14/10. Confirmed 5/14/10. Lien strip granted 2/2/11
          0% payback to unsecured creditors, 56 payments down, 4 to go....

          Comment


            #6
            How about gas costs and Ch13. I currently spend about $300 a month in gas at $3 a gallon. Are significant gas costs considered in a Ch13 plan or am I just stuck with the IRS allowance? What if gas does go up to $4 or more this summer?

            Comment


              #7
              Originally posted by kezard View Post
              How about gas costs and Ch13. I currently spend about $300 a month in gas at $3 a gallon. Are significant gas costs considered in a Ch13 plan or am I just stuck with the IRS allowance? What if gas does go up to $4 or more this summer?
              Anything that exceeds the allowances can be claimed, but be prepared for battle. You get a monthly "operating" allowance for each vehicle and it varies by region (so I can't quote for your region). If you exceed this, you can claim more, but be prepared for a fight. This could get into a "bad faith" argument if the vehicles you have are both gas guzzlers and over the standard ownership allowance. In other words, you are keeping expensive to own/operate vehicles, to the detriment of unsecured creditors. Usually though, if you're paying 50% or more to unsecured creditors (70% in some District), this may be relaxed.

              The real critical part will be whether the gas amounts are necessary for production of income. If it's income producing, then it's easier to explain. If not, then it becomes an issue of bad faith.

              As mentioned, it really depends on the Trustee and on the creditors, since each can complain on a bad faith issue.
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog

              Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

              Comment


                #8
                An interesting twist on this topic: I had a 1 year old BMW ($640/mo.) at the time of my confirmation. This amount included an extended service agreement that I purchased when I bought the car because of my high mileage driven annually. The trustee objected as was expected. However, my lawyer filed a declaration with the court from me that the $640 should be offset against the a.) cost of the additional maintenance contract that was rolled into the loan and b.) the savings against my otherwise higher expenses that would be incurred without this extended coverage. I also included three sentences showing my previous years' auto expenses as expected proof of the offsets. The judge commented to my lawyer at the confirmation that this declaration swayed her. FYI - She is considered the 'tough' judge in my district.

                Comment


                  #9
                  Now that's what I call a great attorney that is willing to fight for his/her client!
                  Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                  Status: (Auto) Discharged and Closed! 5/10
                  Visit My BKForum Blog: justbroke's Blog

                  Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

                  Comment

                  bottom Ad Widget

                  Collapse
                  Working...
                  X