Paying off a SECURED debt before filing

[Slingerland]

Good morning! I have another hair-splitting question, please.

I'm wrapping up my divorce. The divorce agreement states that I will take over the payment on my son's car. There are only 10 payments left, about $3k or so.

The financial damage my ex has done (both by medical bills and subsequent financial mismanagement) is resulting in my filing a C-13 once the divorce is final. 100% plan, 57 months or so. At this point, I'm only 30-60 days late on paying unsecureds, all secured loans are paid to date.

My attorney advised me to stop paying cc's and build up some cash before filing, or make repairs on my house, etc. That's cool, but last night I thought of something... if I stop making the cc payments "today" and drag out filing for 4 months, I can go ahead and pay off my son's car now. There are some advantages to this: it keeps a divorce debt from being tied up in bankruptcy, and my son is graduating from college. By paying off "now" I get the title in MY hands before filing the C-13. Although the car is still part of the estate, it would be easier to (hypothetically) sell or trade it off if I have title in hand (given TT permission of course.)

I know it's a preferential payment to pay off a specific unsecured debt over another... but what about this case of paying off a SECURED debt before filing?

Thanks!

[keepsmiling]

Just my novice guess but other than increasing slightly the value of an asset, I can't see this as an issue at all.
What does your atty say?

[LadyInTheRed]

Paying secured debt before filing is not a preferance. But, I think you should save cash like your attorney advised. Starting a chap 13 with a cash cushion really helps. You can make the car payments directly instead of in the plan. But even if paid through the plan, it shouldn't cause any problems with the divorce settlement or effect your ex in any way.

[Slingerland]

I haven't talked to the atty yet about it, just thought of it last night. LITR, the advantage I see is of having the physical title in my hand. The three Arkansas trustees all require that all vehicles be paid through them. If I pay through the plan, I'm not sure when GMAC/Ally will release the title to me.

But you're right, having a few thousand in cash would be good... no worry about exempting since it's a 100% plan...

[LadyInTheRed]

They should release the title as soon as the loan is paid off. If not, a letter from your attorney should convince them. Ask your attorney about it.

For the benefit of others: Even if it weren't a 100% plan, you could keep non-exempt cash (or any non-exempt asset) as long as your plan pays at least that much to unsecured creditors over the the entire 36-60 months.