payoff auto loan prior to filing

[tkinster]

Hello, first I want to say that I am new to this and hope I am doing this correctly. We live in KY and are looking at filing ch.7. We currently have 2 auto loans. Does anyone know if it would cause any problems with the filing if we were to payoff one of the loans prior to filing? We still owe 3 years on each loan. Any help or advice would be greatly appreciated!!!!

[StartingOver08]

Do not pay off the loans prior to filing. They then become an asset of the BK estate.


You need to check your exemptions for vehicles in KY.

[BROKENN]

And look through here for preferential payments. You don't want to make any. Regular bills OK, but payoff isn't

[justbroke]

As the other posters eluded to, don't put money into a potentially non-exempt asset or "partially" exempt asset! You need some pre-Bankruptcy planning.

[TEW]

I think there is a question that needs to be ask. that is where would you get the money to pay off the loans?
If you have cash laying around you need to put it in something like a 401 K If you are thinking of taking it from a 401 K don't do it. Don’t touch that money.

[AngelinaCatHub]

don't touch that money.

[AngelinaCat]

PLEASE tell me that you are NOT considering raiding any IRA, 401K, or any other Retirement Plan. I didn't see this in the original post, but if you are, JUST DON'T DO IT.

Your Retirement plans are exempt from BK 7 and 13. But once you liquidate those funds and put them into your bank account to pay off a loan, then you WILL be penalized. Not only that, you WILL be penalized for taking from the 'whatever' fund in the first place. In other words, you will end up paying about 3-4 times penalty for accessing your retirement funds and the Income Tax on that.

Just DON'T DO IT.

Sadder, but wiser, after being stupid--AC and ACH

[tkinster]

No it is not coming from a retirement account. Family member knows the situation and had offered to payoff the one auto loan.

[tkinster]

Another scenario--If the auto was sold prior to filing to a family member and it was just sold for the payoff and the money went straight to financing company would that cause any problems?

[StartingOver08]

YES. That is a problem. That is exactly the type of thing the Trustee looks for to declare abuse.

[tkinster]

THANKS!!!! That was what I thought, but I wanted another opinion on it

[woeisme]

Why not wait until well after the BK closes to have the family member pay off the car for you? Anything like this before or during a BK is a big-time problem and a timebomb just waiting to ruin your BK discharge.

[mmenz22779]

From what i understand if you pay off your car the trustee can then use that car to sell it as you have equity in it.

You dont want any equity in it as the trustee will not want it at that point. Paying it off would the the worst thing to do.

I have a 2005 mdx that i bought this weekend as we might file next year. We are expecting our second child in January and needed a family car. I paid $21200 for it and the bluebook is 17-19 for it. so it will be safe, my other 2 cars i can exempt.

You really need pre BK planning. As if you did what you are thinking you might as well as hand the keys over and now you are out of a car and need to buy another one.

We also put no money down on our car. After BK then i will start trying to pay off more aggressively.

Please correct me if i am wrong anyone.

[njguy1972]

do not pay off the auto loan until after the bankruptcy is accepted by the trustee

1-paying it off makes it an asset the trustee can sell
2-if you are in a chapter 13, you want the monthly auto loan as part of your budget the trustee sees so that when your relative helps you pay it off, you will have disposable income for emergencies or savings

supposedly the trustee is evaluating you based on the day you file. It is a snapshot in time. he/she can request additional information but I heard they do not because they are very busy with the caseload raising each year.

[Ladybug78]

Do Not

Hi,
I agree with the other posters. I filed in September and was two payments away from paying off my car. If I had, I would not have passed the means test and would've had to do a Ch. 13. So glad I found this board beforehand.

Good luck!