buying stuff before filing BK - or buying car question...

[curiousbk]

my wife and I are considering filing BK.... I do not think we will qualify for a 7, more than likely a 13.

I know that once we go into 13, we will have a next to impossible chance of buyhing or financing anything during the plan.

we have decent cars.. i'm not complaining. they are both considered luxury vehicles.. no, not BMWs, or M/B... think Acura/infiniti/lexus type cars... one SUV one is a sedan. each is about a 2006 model year with about 60k on each car. each car however was bought used, and has about 4 years left of payments...

if I go into a 13, given the amount of mileage we put on a car, we will hit 100k on each car and will likely have higher than normal repair costs on each car during the plan.

i have read of people buying a car before they go into BK. then you'd have at least one good new vehicle that will be under factory warranty throughout most of the plan.

if I were to go out and be able to get into a new car loan and buy something to replace my main family car.. say I went out and bought a brand new Honda Odyssey minivan.. a $35-40k vehicle - then 3-6 months later I file BK...

does that create problems or is that no big deal? one on the one hand, I wonder if the process looks at that behavior and says " this is why you are in BK, you spend too much, buy stuff you shouldnt have" or says You bought this before BK intentionally... and somehow we would not qualify... or do they rteally not give a crap about what you bought in term so fa secured asseet like a car prior to the BK?

we don't have a probelm keeping our existing cars.. each was bought about 2 years ago... but i can see a personal benefit to me to get into at least one new one so that we have solid good transportation between now and the end of the plan.

i don't intend to buy an X5 V8 %70k car, but at the saem time, i'd rather be in my nice used car vs a cheap crummy new one... not sure if it makes a diffference whether you buy a car, then does it make a difference what kidn you bought?

i'm not planning on buying bigscreens, taking trips to hawaii on the CC before I file...but at the same time, if there is a way I could maximize stuff in my pocket / assets 6 months or so in advance of filing - why the hell not?

any input?

[HHM]

I know that once we go into 13, we will have a next to impossible chance of buyhing or financing anything during the plan.

Actually, NOT true. But you do have more hoops to jump through to do it. BUT...the idea in a chapter 13, and for financial security in general, you STOP using credit, period.

As for buying a car, it can be advisable, but SET your sights much LOWER. 35-40K, try 10-15K and used. In fact, you probably don't need to buy a car at all. 100K miles on import luxury cars is not a big deal, you start getting to 200K, then maybe.

The thing is, you need to keep the payment within IRS standards. For 2 cars, the combined payment must be below $992. If the combined payments would be more than that, you would have a problem.

Plus, buying a "new" car is colossal waste of money. Why pay for the initial 50%+ depreciation; if you want something a little newer, get a 2008-9, but buying a new car is for financial suckers. Sorry.

I think you need a bit of financial reality check, you are filing BK, you CANNOT AFFORD car loans period, so you might as well stick with the ones you have and get them paid off vs saddling yourself with a 48-60 new loan.

[momofthree]

Like HHM stated, your problem is going to be that you have to keep the payments within the IRS standards, which is a maximum of 2 cars financed at $496/mo or less each. Some trustees will allow you to combine this amount like HHM stated, and as long as the total car payments come it at or below $992, then you're okay, but you do have a chance of the trustee objecting if even one of the car payments is above the standard amount of $496. It really varies by district. Essentially, that allows an amount financed of around $25500 @ 6% interest over 60 months. Obviously, as the interest rate increases, the amount financed would decrease and vice versa. So, a $35k-$40k car is pretty much out of the question.

The good news is that a 2011 Honda Odyssey LX has an MSRP of $27580, so you stand a good chance of being able to haggle them down a couple grand. It won't have all the extra bells, whistles, leather seats, and luxury items, but you're contemplating BK, time to scale down and be practical.

[catleg]

I bought two "new to me" used Lexus E class cars a year before filing. (replacing two cars with 100k miles on them; we both work).
The only issue is that I voluntarily (under duress of course) agreed to cap my means test deduction for car ownership at 992 instead of the actual expense which was about 1200/month.
Luckily the financing was 6 years so there is no step-up of my plan payment because of the cars.

[curiousbk]

ok... yes, you are all right, buying a new 40k car is stupid. honestly, BOTH of my cars were bought used / CPO.. my latest one was 3 years old, had 29k miles and I paid literally HALF of the original purchaser... i will skip the idea of getting into a new or trying to get a "newer" car. both our cars are perfectly fine... one has 50k one has 60k on the odometer... they look and run great, have new tires.. etc etc.

you are right.. at the end of a 5 year plan, each car will have around 100k miles... and if at that point, we wanted to replace one, maybe we would qualify for one car loan.

it is difficult to alter the thinking process that got us into this mess in the first place... maybe it will be a good experience to go through it... we will have 5 years of having to live on a very fixed budget, not buying "crap" we don't need. etc.

with that being said.. if there was something one of us wanted/needed - can you do it prior to BK?

i'm not going to buy tickets to hawaii.. but say one of the cars needs a repair? like new brakes? or if my main household computer is ancient and on the fritz and will NOT last the rest of the 5 year plan.. if I go out and spend $1000 on something like that... am I going to get the shaft in the 13?

if I don't use my credit card.? what if I used my debit card..so that it comes out of my checking account? do trustees still see all expenditures since I assume they get your banking records?

what about cash I have on hand? i just got a tax refund of about $2000, I received small bonus check from work of about $5000, and I have maybe $5000 in an emergency fund....

my wife thinks we shoudl take the while 12k and pay off one credit card... then take teh $300/400 / month we save off that car, and pay off the next one and do our own "plan".... maybe that is a better way to do it? or do I do a plan, and wipe out my credit cards and 2nd mortgage on a 5 y ear plan....

i honestly don't think we can get out on our own...

if we don't pay off a credit card with the 10-12k of cash we have on hand, are we goin to lsoe that in BK? would be be advised to find stuff to spend it on.. that's not going to show up on a credit card.. it's going to be money we coudl use to pay for hte lawyer, and maybe purchase something we will need - like a computer?

i earn 140k / year
stay at home wife, three kids. wife could work but can't make enouhg money to offset all the day care money so it is $$ better if she is at home
mortage is 1500 first / 650 second / 120 HOA. hosue payment is impounded so it includes PITI
student loan payment of $1000. total owed is 120,000!
credit cards are at about $70k. minmum monthly is around $2000....
car payments are slighly over $1000. one car is 450, one is 550ish..

when you factor in our monthly payments on the house, cars, student loan, and making the minimums on the CCs..and then we pay for food, bills, insurance, cell phones, etc... there is not much left over. many months we break even or go negative. i'm sure we could go gihad on the budget, sell one car and buy a beater, shut off one cell phone, cancel cable... etc etc...

maybe that is the way to go...

thanks.

[HHM]

Yes, it is usually a good idea to "prepare" for your chapter 13 bankruptcy. If you have been putting of some larger cost items due to your financial circumstances, if you have the resources, you may do them before filing BK. The key is that the item or service must be reasonable and necessary. New Brakes, fine, new tires, fine...18" chrome rims, not fine.

absolutely, positively do not pay back any creditor prior to filing BK.

[momofthree]

If you don't have any equity in your home then you can use CA system 2 exemptions, which has a very generous wildcard exemption of around $21k (too lazy to look up the exact figure, lol) that you can use to exempt cash on hand.

Also, when you file ch.13 you can keep assets and they will simply create a minimum to be paid into the plan. The bk rule is that when you file ch.13, your unsecured creditors have to receive at least as much as they would if you filed a ch.7 and all your assets were distributed to your creditors. So, for example if you have $6000 in non-exempt assets, you'd simply have to pay at least $6000 to your unsecureds over the course of the plan, the equivalent of $100/mo for 60 months. Chances are, with what you've posted, you will be paying back a fairly high percentage anyway, so keeping non-exempt assets won't really be an issue for you.

As far as the student loan, it will go into forbearance during your bk term, so that will free up a large chunk of money to be paid to your unsecured creditors. If you can strip your 2nd mortgage, that also frees up a large chunk of money as well. You may end up in a 100% plan, BUT you will not have to pay any interest in that time.

[curiousbk]

as for our house there is ZERO equity in it. so the wildcard exemption of $21k... does that only include cash, or would it include stuff like furnishings in our house, tvs, jewelry, etc etc? we don't really have lots of that stuff.. but for my wife's wedding ring and the usual type of household stuff - couple of tvs, appliances, etc.

so if I have $15k in cash - I can keep it? and they won't take it from me to pay off crteditors?

so to be cynical - if I wanted to buy 18" chrome rims - or take a trip to vegas - or whatever, either right befroe BK or during BK - does it matter? since I can keep that much cash? like seriously, if I had to buy new tires for $1000, and I wanted to be a sleaze and buy those chrome rims for another $1000 - do they see that and I get in trouble? what if I just k ept the $2000 on hand, let it stay in pocket via the exemption, adn then buy it during my plan??? not that I want to, it's ust that the whole BK system seems flawed and counterintuitive...

like the means test. My understanding is that if I had bought a hosue that was way ove rmy head... and had double the house payment... i'd qualify for a ch 7, but since I bought a hosue that was cheaper, I end up not qualifying. seems to almost reward extremely reckless behavior. i'm in financial trouble...but they are basically saying since i'm not in EXTREME trouble, I can't qualify... it's enough to make someone want to go out and try to accumulate even more $$ stuff and be reckless to qualify.... honestly, when I modded my home loan, same thing. i GOT A MOD. i had friends who had houses that they bought that NO WAY they coujdl afford, and they got a beter mod than I did.. that whole racket rewarded the landscape guy who bought a $750k house on internest only and said 'touch luck" to the guy who made twice as much but boubht a $350k house on a 30 year fixed... insanity...

anyway... so stuff like house appliances? ok. we have a dishwasher and washing machine that are on the fritz.. they work.. but one make a fujnny noise.. one leaks at times... they work now and if I wasn't going to file BK I'd wait till they break. if I was going to file BK and had cash on hand, i'd replace them NOW so I don't have to deal with it in a plan... is that kidn of stuff okay?

i'm not sure HWO I figure what is okay and what's not okay.

does it matter if I pay for it out of the cash I am pocketing from my job vs putting it on a credit card? i'm not planning to put ANY of this stuff on a CC, but I am considering NOT paying the CC people so that I can keep this money in my bank account. then I go spend it.

do they ask me what I did with the money at a hearing? like I stop paying my credit cards for 6 months, amass, $15k.. WTF does the trustee care what I do with it if it's all going to be somethi I can keep via a wildcard exemption anyway... for all they know I'd keep it, and run off to vegas with it and put it all on roulette... i mean that's the kind of stupdi stuff that people who get into BK do... sorry man.. I went to vegas with it hopeing to get it back and blew it all.. do they kick out of BK court???

sorry to joke around.. but some of this stuff makes no sense to me. they want me to pay creditors back, but i can keep $21k. if I cank eep 21k in cash, and I can stop paying credit cards months and months before I file....

any input on this is appreciated.

[HHM]

Yes, you still must show good faith.

So, if you took a $10K trip to Vegas, it won't matter that the cash is exempt, the case can be denied for lack of good faith.

[minan]

Curiousbk: there are still a lot of things about bk and chapter 13 that are confusing for us. You're not alone, however this forum has been a great source of info and of comfort especially on those days when you feel down and wonder how you ended up in this mess...we still have many of those as we are still waiting for confirmation. Every time we think we've taken a positive step forward, something else takes us 2 steps back. This last week was an example.

You will be under the microscope or should say your finances will be under scrutiny. You will have probably more downs at the start. You will feel bad about yourself and how you ended up in this situation. I'm saying all this because this is not an easy road to take. It's a roller coaster ride emotionally and mentally. The scrutiny from the Trustee is difficult. You will need to make changes to your lifestyle, but keep in mind at the end of this road you will have a clean start.

[catleg]

The one thing I sort of regret...I have two loans at 10% and 12%, I wish I had let the trustee make the payments, as I think he would have forced down the interest rate, but the temptation is to minimize the ch13 plan payment, so we kept the cars outside with us continuing to make payments.

[curiousbk]

do the trustees grill you and try to beat you down emotionally or something????

i would imagine that many people in BK are there for various reasons... bad decisions. living beyond their means... and winding up creating a hosue of cards that has come tumbling down on top of them..

i can see the good faithi thing... stopping payment on CC and taking a 10k trip to Vegas does look pretty crappy. i have no intention of doing that.

i would be receptive to trying to maximize certain benefits to myself - like fixing a bad washer or dishwashing machine.... getting tires that need to be replaced, stuff like that.

is there scrutiny or negativity if you stop paying before the BK and pocket tha tmoney into the bank?

if I don't pay bills for 3 months or 6 months, and save that money, will they let me keep it? they must know that peopel do that.. stop paying and thenpocket money before BK??/ but they let you keep it.?

then do they scrutinize what I do with it after I file BK and am in the plan? if they exempted 20k I had in cash... do they care what I do with it while I'm in BK? or is every move I make evaluated?

why is there an ad on this BK site for leasing BMWs... just noticed that as I"m putting up this reply... i can't imagine a BK site is the right place for BMW to want to advertise leasing a luxury car! maybe they think we can't help ourselves...

i have to admit..there are a few things I'd liek to treat myself to beore I file BK.. nothing nuts but there are things I'd like to get if I know I'm going to file.

let me put it this way - is there a general time limit / cutoff where the trustee isn't going to care about what I bought? meaning this - is I were to run out and buy a new sofa, new dishwasher, new washer/dryer, and those 18" chrome wheels... maybe an ipad, a computer... i could go on... and then within 30 days I were to file BK... yeah, that looks really messed up.

what if I know I am going to probably file.. but i know I can float my finances for another 6 months.. so I buy some of those items now... the sofa, the appliances even the bling bling spinner wheels.... and then I keep paying stuff for another 90-120 days.. and THEN I file BK.. is there some presumption where even thought they might think that I "knew" I was going to file and bought some stuff near the end... but b/c of the time lapse between buying and the BK filing - they would just let it go?

basically, yeah, there is some stuff I want to get, but if I can spread out the "getting" and the filing - will I be okay?

if I'm going cold turkey for 5 years... I'll admit.. I'd like to take care of my household to hold myself over.. i don't intend to get back into this problem again... BUT, if I'm going to sabotage my credit, and be on a shoestring type budget for 5 years.. i'd like to maximize how it benefits ME before I do it.. even if I am pushing the envelope.. as long as I"m not breaking rules or doing anything illegal or doing something that will ruin teh BK process.

i had read that if people charged things on their Creidt card, but it was 60 or 90 days before the BK, there was a presumption tha tit was NOT fraudulent. but you KNOW people will go out and buy a big screen 90 days before they know they are going to file BK... but does this go on and just slide by?

is it a time thing a $$ amount thing,, do they microanalzye my spending habits and payment habits... and if so, over what time frame / time span do they look at it.

thanks.

[HHM]

If you are looking for sympathy, get a dog. You won't find it here. You earn $140,000 a year and lived beyond your means for many many years. So, the idea of "treating" yourself is simply more of the same attitude that got you into the mess and now you want to make things worse, I certainly don't buy it and most on this forum are not going to be sympathetic. If you really think that it will be 5 years of shoe string and then "back to normal", think again. The changes you will need to make in a chapter 13 are "lifelong" changes, not just a temporary hiccup in your financial path. If you don't learn those lessons, you will be back here 5-8 years after your chapter 13 (assuming you can even get through it, I have my doubts given your attitude), and will back in the BK boat.

As for your questions, they don't grill you per se, but you need to be in a position to justify what you did.

Let me put it this way, if you were called to testify as to why you spent money on X, are you comfortable that a judge would see it your way and say, no problem?

[newbie2]

curiousbk, you received many helpful responses here: http://www.bkforum.com/showthread.ph...into-a-7/page3

Frankly, you appear to want it all to go your way, and bk isn't like that. Also note that filing for BK is optional - you don't have to do it. If you go on a pre-bk spending spree now to make yourself feel better you should expect some pushback from the trustee.

[IamOld]

to HHM - sorry for intruding on this thread, but reading this has a question for me:

spouse and I have two cars, and yes the two payments are MORE than the IRS max - which where I live the atty didn't even blink over...why is that a problem?? in a Ch 13? Again, in my area no car=no transport=no job=no money. Incidentally, my mort is only like $90 over IRS "allowed"