Sell car to pay mortgage pre BK?

[2Bshinyandnew]

Hello all,

I am considering filing a Chapter 7. My income falls well below the means test. I have over $70k in unsecured credit card and medical debt (some CC debt is joint with ex spouse, some in my name only), no student loans, no other liens, garnishments, etc. I am owed by court order child support(current) and alimony(retro and current). I'm in school part time and I'm about 15 credit hours away from finishing an A.S. degree which will allow me to (hopefully) earn a decent living.

Last month, my mom helped me out by paying my mortgage directly to the lender. I have never been late on my mortgage. If I understand my situation correctly, my home and all of the equity would be exempt as long as I keep paying my mortgage. I live in this house with my kids in Florida and bought the house in 1999.


My plan, pre-BK:

I own an automobile that would NOT be exempt, except for the $1000 auto exemption, and has no loan/lien on it. It is worth about $8K. My plan is to sell this car and use the money to buy an el-cheapo heap worth $1000, and to use the rest to pay my mortgage for a couple of months and other typical monthly expenses not covered by my income. I would sell it to a reputable dealer, not a friend or family member. Before I do though,

My Question(s):

If I sold this car for cash, kept careful records of everything, and used the proceeds of the sale to pay my mortgage and other regularly occurring expenses, would the sale of this car be considered a fraudulent transfer? I would not use the proceeds for anything other than my mortgage, utilities, etc.

Also...If my mom does need to cover my mortgage again (which I am trying to avoid), is this 3rd party payment considered income to me or an asset in any way? Was it a mistake for her to pay this? (the alternative was to be late)

Lastly, if I borrow from my exempt IRA to pay my mortgage and then pay my IRA back with the proceeds from the sale of my non exempt auto, would any of these transactions be not allowable or fraudulent or in any way cause me problems if i file a Chapter 7? Again, I would maintain very careful documentation.

Thanks for any help and insight!

[PoorGrammyinBK7]

Ok - not a lawyer, but I will try to answer some of your questions:

As for selling the car - as long as it is not to an "insider" (close friend or relative) and sold for fair market value, (all documented of course) there should be no problem. Many of us had to sell items to pay bills.

I don't know about the IRA thing though. I think you do not want to touch that IRA. Because if you convert it to cash, your exempt asset becomes non-exempt and then if you pay it back - you are paying yourself, so that may be seen as a fraudulent transfer.

[JRScott]

I have a question, how do you plan to make the mortgage payment after bk?

Are you planning to surrender the home?

[2Bshinyandnew]

I have a question, how do you plan to make the mortgage payment after bk?

Are you planning to surrender the home?

I'm hoping once I finish my degree (I'm 15 credits away from my A.S. in paralegal studies), and pass the national certification exam, I will be able to earn more than the $10/hr I can now. I'm also in the end stages of a divorce, which has caused financial hardship for everyone, the attorney's fees on my end have been over $12K. I paid my divorce attorney from both savings and credit cards, those charges were almost 2 years ago! I never expected things to turn out the way they did. My expenses post divorce should level out once I'm not shelling out $$$ for attorney's and therapists and evaluators, tuition and books, etc.

My soon to be ex is filing BK7 as well, and so far the two attorneys we consulted recommended filing separately ( we actually sat in a room together and consulted a BK attorney together, the first amicable meeting we have had with each other in two years!), he, before the divorce is final, and me after. So far we are 2 for 2 concurring on the file together/separate issue. I'm trying to come to terms with the fact that both of us have to file, no matter what the family court judge orders, or what we each promise to do, the joint debt will be my responsibility once the ex files. There is just too much debt and no way out.

The house, and deed, my homestead property is in my name only (inheritance) and my husband co-signed a mortgage in 2003. A big financial blunder, for both of us! He will likely not reaffirm the debt since he has no financial interest in the house (I don't blame him!) and it is my understanding that even if I reaffirm, the bank probably will stop reporting timely payments to the credit bureaus. I don't care though because I have enough equity to make it worth it. I want to stay until my son finishes High School. I have been a stay at home parent for 18 years.

So, no, I was not planning on surrendering the house. Rent in my area for an apartment for my kids and I would be the same as my current mortgage payment.

Sorry for prattling on so!

[TEW]

I'm hoping once I finish my degree (I'm 15 credits away from my A.S. in paralegal studies), and pass the national certification exam, I will be able to earn more than the $10/hr I can now. I'm also in the end stages of a divorce, which has caused financial hardship for everyone, the attorney's fees on my end have been over $12K. I paid my divorce attorney from both savings and credit cards, those charges were almost 2 years ago! I never expected things to turn out the way they did. My expenses post divorce should level out once I'm not shelling out $$$ for attorney's and therapists and evaluators, tuition and books, etc.

My soon to be ex is filing BK7 as well, and so far the two attorneys we consulted recommended filing separately ( we actually sat in a room together and consulted a BK attorney together, the first amicable meeting we have had with each other in two years!), he, before the divorce is final, and me after. So far we are 2 for 2 concurring on the file together/separate issue. I'm trying to come to terms with the fact that both of us have to file, no matter what the family court judge orders, or what we each promise to do, the joint debt will be my responsibility once the ex files. There is just too much debt and no way out.

The house, and deed, my homestead property is in my name only (inheritance) and my husband co-signed a mortgage in 2003. A big financial blunder, for both of us! He will likely not reaffirm the debt since he has no financial interest in the house (I don't blame him!) and it is my understanding that even if I reaffirm, the bank probably will stop reporting timely payments to the credit bureaus. I don't care though because I have enough equity to make it worth it. I want to stay until my son finishes High School. I have been a stay at home parent for 18 years.

So, no, I was not planning on surrendering the house. Rent in my area for an apartment for my kids and I would be the same as my current mortgage payment.

Sorry for prattling on so!

[2Bshinyandnew]

OK, duly noted, I understand where you are coming from, and appreciate the insight. I should graduate this June, I guess I should have clarified that I'm registered and taking 3 classes right now (9 credits) and will finish he last 2 classes (6 credits) in the spring. I only work part time right now.

In any case,The debt is still there, I'm still going to be stuck with my own personal debt as well as the joint debt when the ex files, whether I have income to cover the mortgage or not, whether I surrender the house or not, the trustee WILL take my car, regardless. Both attorney's I consulted warned that the equity in the car isn't enough to litigate for the new Florida $4000 wildcard exemption even if I do surrender the house. So my original question, which is, will selling my car and using the proceeds to help pay my necessary expense shortfall while I'm in school and working part time violate any rules/laws as far as preferential payment to creditors or fraudulent transfers?

If I do sell the car and use that money for the next 4 or 5 months to cover my mortgage, will the trustee look at that and say that it was a preferential payment to the mortgage company, that I used a non-exempt asset to preferentially pay one creditor over another, if yes, should I worry about that?

Thanks!

[JRScott]

You can't pay forward your rent. If the Trustee discovered it he could take back some of the money for distribution to your creditors.

If you did it you'd need to wait 4-5 months to file to let the money run out. Keep close tabs on what you spend it on as the trustee will most likely ask.

[2Bshinyandnew]

You can't pay forward your rent. If the Trustee discovered it he could take back some of the money for distribution to your creditors.

If you did it you'd need to wait 4-5 months to file to let the money run out. Keep close tabs on what you spend it on as the trustee will most likely ask.

Thanks! I intend on waiting until after January 1st anyway.

If I was using the proceeds to pay my mortgage v rent, would that make a difference? Also, my mom paid my mortgage directly to the lender for me last month and would do so again if I asked, is this transaction a problem if it continues for 3-4 months as far as my income, my mortgage is $1250/mth PITI so that amount plus my part time income doesn't push me over the threshold for the means test. Would my mom paying my mortgage directly affect the status of the house as exempt?

Thanks again! This forum is awesome, I have learned so much.

[JRScott]

So long as she is paying them directly I do not believe it will cause issues, but it is something you should ask a lawyer