Using Perfected Vehicle Lien As A Tool

[GPark]

From what i've heard it seems to me that anyone with a fully paid off vehicle should borrow some money from friends or family and perfect a lien on that vehicle. This enables you to claim the full ownership expense on the means test, helps towards exempting the car, and it will help increase your schedule j expenses. I have not done so yet but I have a few questions. On schedule J would you list the payment amount established in your repayment agreement? For example, if you agree to borrow $2000, to be paid back in 6 installments of $350. ($100 interest) Would you put down $350 or do you have to divide $2000/12? Also, does the borrowed money count towards income? Any thoughts?

[ready2puke]

I was also thinking of getting a lien on my car since I need that exemption. What I found out (and dont know for sure if this is true), is that you need to get full value for the lien. So what the heck would I do with 9k if Im not paying cc's. Then I'd have another debt to pay off (which I need like another hole in my head). I would love to get 3k I could handle that (would be great for rent, insurance, ect.) but I thought it would have to be full value...hope Im wrong here.

[GPark]

Borrow up to exemption amount

A lawyer on a blog(I'll try to find it) said that even a small lien will qualify for means test allowance. I believe the way to proceed would be to borrow up to (or at least close to) the amount that the car value exceeds your exemption amount. For example, if the fair value for your car is listed as $8000 and your exemptions cover $5000, the lien for $3000 would enable you to keep the car.
The trustee would have to sell the car for over $8000 in order to make a penny for unsecured creditors. He would have to pay the $3000 to the lienholder and $5000 is protected. He will probably not want to bother with it unless he is guaranteed to recover a significant profit. I'm almost 100% certain you don't have to borrow the full value of the vehicle. I would definitely look into it.

[mysticspirit25]

wouldnt that be considerd fraud, since you have an asset and are purposely getting a lien on it to avoid the trustee taking it? I mean if you planned on actaully "borrowing" the money and paying it back that is one thing, but did you plan on paying back the money to the people right after the BK, or would the lien be just on paper. It would raise a question to me.

If you went to American General and got a loan that would be one thing, but friends and family...I would give it a second look. JMHO.

[GPark]

Not fraud. You have to go through the secretary of state/DMV to legalize it (properly perfect the lien). Only after you go through the process does it become a legally secured debt. I am not saying you can simply claim that your buddy Joe gave you $5k, there has to be a paper trail to legalize it. Imagine if you borrowed money to your brother to start up a business. Business fails and he can't/won't pay up. If you set up the lien on his car he cannot discharge that debt in a bk. A handshake agreement would get wiped out. Stuff like that happens everyday. Don't ever think you are scamming anyone by utilizing the laws to protect and benefit you. Remember, most debtors (including me) could use the cash to pay for the bk, lawyer, etc. Just make sure you don't take the cash and buy a new home theatre system in lieu of paying any debts, that would be fraudulent.

Think of it on the other side of the coin. You just fully paid off your vehicle last month but got laid off and have to file bk. Your ownership allowance on means test = 0.00. Your buddy who has 1 more payment to go gets the full allowance. That is the real fraud with this stupid bk system. You can be sure I'll try and protect every red cent I can by utilizing any legal means possible. I advise everyone else to do the same.

[okiemom2008]

I wondered this too because we have a tool truck we cannot get rid of. We bought it on 0% apr credit cards(chase and citi) and so we have the title(we bought it for 11,500 and selling it now that the business went under for 8000. We cannot get rid of it. The lawyer told me we could keep two vehicles(the one we drive and thetool truck) If I could, I would trade in the tool truck for a used car or truck but who is going to want a huge tool truck?

O