Attorney told me to buy a new car in Chapter 13

[Lesa13]

Hey all - haven't been on here in awhile - moving to a new rental house and giving my house back to the bank is taking a lot of my time.

I had a visit with my atty this week. He told me that since I have a very old vehicle (10 yo) with almost 200,000 miles on it, and since when I "give my house back", my debt load in the Chapter 13 will drop so dramatically, his recommendation was for me to go buy a brand new car after I get moved and settled.

Now, this did not seem right to me. Yes, I need another car badly. But to tell me to go buy a new one when I am IN BK? However, apparently this is something that is routinely done, so wanted to throw it out there and see what everyone's opinions are.

The deal is: after my house is wiped off of my debt load, I will obviously still be paying the same amount to the court every month ($750). Atty told me he'd prefer I got "some of that money back" instead of the piddly creditors left on the BK (house was the big 'un) getting 70 cents on the dollar instead of the 30 cents on the dollar "they deserve" (his words, not mine).

He recommended I go to a large dealer of American-made cars with about $1,200-$1,500 cash in hand (save that up, obviously) and tell him, I will buy that car over there at sticker under two conditions: one is you finance me in chapter 13 and two is you understand the deal can't close until court approves in about 40 days. He said he guarantees I won't have to go to more than 2 dealers to get this done. He said get a brand new car, try to get taxes, license, etc. rolled into the price, along with an extended warantee. He said aim for a total payment per month of around $320 and that will be taken away from the $750 payment to the court. Thus, I am "getting that money back."

I have owned one new car in my life - the one I am driving now that is 10 years old. I paid $12,000 for it new. As I said, I do absolutely need a new car for practical reasons - I drive a relatively long distance every day and this car has about had it, although it has been good to me. But to walk onto a dealer lot to buy a brand new expensive car WHILE I AM IN THE MIDDLE OF MY BK just seems odd to me. I told the atty not only did I feel intimidated, I felt like the dealer would take one look at me and say "you, in BK, asking for a NEW CAR? hahahahahaha!"

Again, I did ask around though and it is not strange to anyone else I have talked to (including attorneys).

Any thoughts/comments?

[lrprn]

You are required to have your trustee's permission to take on new debt during your plan - is that the 40 days your attorney mentioned? Seems that he doesn't think that will be a problem (I find that unlikely, especially buying a new car). However, let's say you have a very liberal trustee who gives permission AND that he/she doesn't want all that extra cash for a higher payout to your plan creditors (which is their job to get), then ask your attorney for the actual names and locations of "large-dealer American-made cars" that he personally has witnessed give someone in Ch 13 a new car loan just because they put $1200-1500 dollars down.

Just curious - how are you going to amass $1200-1500 while you're in your Ch 13 plan? Your trustee might want to know more about that too.

[aa06a47]

Actually, I believe most judges (not the trustee) have to approve a car loan, and if you go in needing to replace a car with 200,000 miles on it, what can they say. That is why the attorney said 40 days since it has to go to the judge to approve.

On the credit repair sections, some say Ford is bk friendly. Might try them.

[Minnymouth]

Absolutely..........
If your attorney says now is the time to buy - then go buy if you need a reliable vehicle...... I'm sure he knows what he's talking about.....
Since you travel a great distance all the time, you definitely need a good vehicle and the Judge will agree......

Now is the time because later it will be difficult to buy a auto in Chapter 13 without the Trustee's approval..... now the Judge can approve it under your plan................

It's amazing some of the things you can do in Chapter 13.......

Keep us posted.....

[Credit Hater]

hmmm, nice idea. Mines 10 yrs old and will soon hit 150,000. I thought about doing this before I file and buy a cheapy, like a kia, or anything small and good on gas. That way the trustee see's I'm not trying to do anything lavish. i drive 300+ miles per week because of work.

[anonymuse]

CH, there's some pretty inexpensive Saturns out there too.

[Lesa13]

I think in my particular instance, this is maybe just a happy accident of several factors. One is that my debt load is going to be dramatically decreased in a month with the return of my house to the mortgage company and that the rest of my creditors are unsecured for relatively "small" amounts. Second is that I am not going to be able to convert to a 7 (atty felt they wouldn't approve me for the small amount of debt and my supposedly LARGE income). Third is that I am driving an old vehicle with a lot of miles. So I think all of these factors put me in a position for him to tell me to buy a new car. He said if I had a 2-3 yo car with 50,000 miles on it, he would not feel comfortable going in front of the judge asking for approval of something like this. However, he felt he would have no issue with my circumstances. And I guess I felt like, why would he put himself in front of a judge/trustee asking for permission to buy a car if it is going to make him look like an idiot - not going to happen with this guy.

He is basing his numbers off of what he wants left over for paying the creditors and so, in his opinion, I can "afford" a $300 or so a month payment based on my monthly 13 payment now. He did actually give me several names of dealers to try. He also gave me a long winded description of the auto industry at this time and how car dealers are pretty much wanting to sell cars to anyone. Whoever finances the vehicle purchase will have a guaranteed payment for the next 26 months from the court - not from me directly - so I think that he feels that is a pretty good incentive for financing - and I hope he is right, because my credit obviously sucks.

Plus, of course the cash in hand, which will be the most difficult. Hopefully with my move to another house, my finances will allow me to actually buy groceries, pay the electric so it doesn't get turned off and put gas in the car

Thanks for the input. I'll let you know what I end up buying. It will be nice to not have to worry about "will it start, will something happen and I'll end up on the side of the road", etc.

[SinkingFast]

#1,............. It sounds to me like you have Rebellious Attny. The New Law specifically forbids attnys from giving financial advice, yet yours did in this instance. And, a whole group of attnys has just sued to get this part of the Law stricken so that attnys can give clients advice.

#2,........... You're going to be limited in your selection of a new car for the payment your attny suggested. We financed $12500 at a decent interest rate, 7%, on the last vehicle we bought before our credit went to hell in a handbasket. Our payments were right at $255/mo. With a Ch 13 and not so hot Credit, your interest rate will be significantly higher. So just a guesstimate there says you'll be able to shop the $12K-$15K market. Not a big luxury car, but still something rather decent with substantially lower miles than you currently have. And, coincidentally, $1200-$1500 is about a 10% downpayment. A show of good faith to the dealer.

Just a tip for utilizing your 40 day time period. Plan to hit the dealers no later than the middle of a quarter when you start negotiating. That way you'll be clearing your vehicle off their lot before the end of a quarter. Typically, dealers pay taxes and insurance based on their inventory on hand at the end of a quarter.

[Lesa13]

Thanks for the tip about the quarter thing!

I am under old law. I also think my attorney would have to bomb the courthouse before anything would be done to him. He is very well known and well respected - although not necessarily by me :> He is THE BK person in this area. He is also a very eccentric and strange guy.

I think you are 100% right about how much car I should be looking for. I think my interest rate is going to be outrageously high - like 15-20% and I think $20-22,000 is going to be way way out of my price range, no matter what atty says. I am going to go to the dealer I first did business with on the car I have now - I used their financing (Toyota) and paid off the car in 4 years. Hopefully they may consider me since I have a relatively good track record with them in the past. If not, I guess I'll shop around and I can always use that 722 place that people have mentioned on the boards before.

Thanks for the tips!

[helpless]

Good luck in finding someone to finance you. We couldn't find anyone to finance my DH and he had a score in the 700's, (never late on any cc payment, house payment or mortgage, just knew that we couldn't hold on any longer) before bk13. Our attorney told me to get a car financed in my name (I am not on bankruptcy and needed no approval) since my DH gets a car expense check every month and that is not considered income. Let's just say that although my credit is good, I don't make enough to qualify for a car loan (part time job), so we had to do some creative financing to come up with $5000 to buy him a car. If you find someone that finances you, let us know on the board. I couldn't find a single place.