can I purchase a new car weeks before filing chapter 7

[jpntx]

Can I purchase a new car weeks before filing chapter 7, and before my credit tanks. I plan on surrendering my current vehicle. Ford expedition and still own $16,000 and kelly blue book value is $5,900. My lawyer said I could I just need to surrender one of the vehicles.
I figured out the expenses of the expedition and it cost me close to $1,200 per month for payment, insurance, and gas. The new car is going to be cheaper payment and in gas. I guess I just don't know how to explain to the trustee, why I puchased this vehicle.
thx,

[Priceless ProSe]

Well your lawyer gave you the green light....

Do you have to put some kind of money down on the new auto? If so I would wonder if the trustee could go after this payment, forcing you to come up with the money if you wanted to reaffirm the new loan in the BK.

Also, if you get a really good deal there might be some kind of equity in the vehicle which you would then have to protect (the chances of this are slim).

Lastly, usually the finance company lets people reaffirm these loans but they dont have to, that is to say they have a say in the matter as well (I think).

As far as explaining to the trustee, I think the explanation you gave here was fairly straightforward.

[danaf]

I wouldn't do it on the eve of bk. My trustee asked me if I had bought a car within the six months prior to filing. Not sure why but I guess to them it looks bad.

It's smart to do if you can wait on filing. But it sounds like you already obtained a lawyer and will be filing soon.

[jpntx]

I got approved through capitol one auto finance blank check, I haven't used it yet. I want to get assurance from my lawyer on purchasing a car now.

[Priceless ProSe]

There are alot of posts on buying cars post BK, check them out. Only downside is the interest rate. A BK in itself doesnt ruin your credit score, it is the things people do leading up to BK that ruin thier score. I have a friend who paid regularly on all his accts up until the day he filed, and another who always misses payments and pays her CC late, but the guy with the recent BK has a much better FICO score.

[laurannm]

When you say weeks, how many weeks are we talking? I think it's ok to purchase a new vehicle, but you want to try and make at least a few payments on it before filing, to show good faith.

You also want to make sure the new car is reasonable in price (wouldn't recommend going out and buying a Mercedes).

[RedLight]

We purchased my wife and new car near the end of June. We are still about a month away from filing, however, my atty sees no problem with it. I guess it is b/c we purchased a 2004 car with zero down and right at the nada value. However, I think you might be in trouble if you purchase a new BMW 3 series and put $10K down on it.

[jpntx]

I was thinking more like a 2009 toyota camry. #1 because of the fuel economy. #2 A new car will last a while, just in case I'm not able to finance another vehicle for some time. I saw one at a local dealership for 17999.00.

I was offer a 11.95 % a little high, but i don't think I would be able to get the same offer soon after bk goes thru. Once I surrender my car, all that I would have left as means of transportation would be a '91 ford taurus, need I say more....

[liz417]

Can I purchase a new car weeks before filing chapter 7, and before my credit tanks. I plan on surrendering my current vehicle. Ford expedition and still own $16,000 and kelly blue book value is $5,900. My lawyer said I could I just need to surrender one of the vehicles.
I figured out the expenses of the expedition and it cost me close to $1,200 per month for payment, insurance, and gas. The new car is going to be cheaper payment and in gas. I guess I just don't know how to explain to the trustee, why I puchased this vehicle.
thx,

Hi there,

There was a post recently about a family who was filing for ch 7 and his attorney told him to get a new car the week before filing...guess what? It cause an issue at his 341. I can't remember the thread but it was within this past month...be careful!

I purchase a new car (actually a 2007), but I am filing ch 13...

Good Luck!

[gophermn]

Attorneys will not be asking you questions at your 341, it will be your trustee doing that. So even though your attny might feel it is ok, I would think twice. My attny said to NOT spend from the date of filing to the closing. Minimize any questions you will be giving the trustee - sit tight for a bit.

It's a tough deal but once you get through the 341, remember you are still under the microscope of the US Trustee. They were the one(s) who began asking me questions about my income, wife's income, her debt, etc...

In a nutshell I just don't want to see any of you tread on thin ice if you can hold out another 45/60 days.

[Help!]

Definitely not, especially a brand new car! If you finance it you will be obtaining new credit on the eve of bankruptcy. Why risk dismissal?

Our attorney told us we could purchase new vehicles with cash we had taken from our 401K. Both vehicles were taken from us.

[RedLight]

[QUOTE=Help!;175757]Definitely not, especially a brand new car! If you finance it you will be obtaining new credit on the eve of bankruptcy. Why risk dismissal?QUOTE]

Agreed...What will it look like to purchase a new car. Better off with one that is a few years old. We just bought a 2004 last month and I am assuming the case will be filed beginning of August. Our atty seemed find with it as there is no equity in the car, got a really good deal. Help! is right, DO NOT BUY A BRAND NEW CAR!!!

[laurannm]

[QUOTE=RedLight;175759]

Definitely not, especially a brand new car! If you finance it you will be obtaining new credit on the eve of bankruptcy. Why risk dismissal?QUOTE]

Agreed...What will it look like to purchase a new car. Better off with one that is a few years old. We just bought a 2004 last month and I am assuming the case will be filed beginning of August. Our atty seemed find with it as there is no equity in the car, got a really good deal. Help! is right, DO NOT BUY A BRAND NEW CAR!!!

I tend to disagree. I think it really depends on the type of new car that you are purchasing, and exactly how soon before filing. Look around on these boards and there have been plenty of people who have purchased new cars a couple of months before filing Ch 7 and had no issues. As long as your justification is sound (i.e. your previous car had 200k miles and your commute is long, would be a good reason), and as long as the car is reasonable and not luxurious (a $14k car is one thing, a $30k SUV is another), you should have no problems, particularly if you make a few payments before filing.

[Help!]

I didn't see anything unreasonable (or particularly luxurious) about a Honda Civic or a Toyota Corolla. Our high mileage vehicle died so we replaced it with a Corolla. We bought the Civic to replace the expensive, gas guzzling SUV we're surrendering in BK. If you sit through some 341 hearings, you will see the looks of the faces on the trustee and UST when they hear that you're filing Ch. 7 and plan to drive away in a brand new car. A Camry may not seem like a luxury car to you based on your previous lifestyle, but once you're in the courtroom and you hear that most of the people around you are driving 10 year old American made cars worth less than $5000 you'll be glad you didn't buy it. Trust me on this!

[laurannm]

True, but in your case you paid cash via 401k, right? Meaning you probably had some equity in the cars at the time of filing?

But I would think that if you had made some payments and will continue to make payments during and after the BK, a trustee couldn't dismiss your case soley on the grounds that you bought a reasonable car before filing, could they? I suppose it could be another type of situation that varies from district to district.

Each of the 6-7 lawyers I spoke with all said buying a new car would not be an issue, as long as you made a least a few payments before filing, it wasn't a Mercedes, and as long as you had no equity in it (otherwise the trustees will be looking to get their hands on it).

Now I can see a potential issue if you bought a brand new car on Monday and filed on Tuesday...that could be a problem.