Can i file Chapter 7 right after getting a new car ?

[kingofsnakes]

thank you everyone who responds to this..

i have $53K worth of personal debt, and 6 months ago, after my salary was cut 20% i decided to file chapter 7... my lawyer recommended i get a newer better car before filing, and it took me 5 months to sell my old car.. you know how the current market is.. a week ago i purchased a new (used) vehicle, but now i am wondering if i need to wait a month or two before filing..

my bank account shows financial transactions related to car sale in the first days of June, since back than i borrowed the money to buy out the car title.. but physically the car has been sold just a week ago, though no transactions show up on my account this time around, buyer gave me cashier's check and i cashed it in buyer's bank.. all of this money, $11K to be exact, i owe to my friends, i used $3,500 to put downpayment for a new car, and returned the rest..


so what do you think, do i need to wait ? can i clalim i got the car at the beginning of June and file now ? or does it even matter ?

thanks a lot..

[keepmine]

You got all manner of problems.
The money you returned to your friends is a preference/insider payment and the trustee will go after your friends for the money.

[TBLTZ]

If doesn't matter if you do chap 7 or 13 you need to wait 90 days to file after buying a car.

[kingofsnakes]

You got all manner of problems.
The money you returned to your friends is a preference/insider payment and the trustee will go after your friends for the money.

this sounds scary... could you tell me more about this ?

i couldn't sell my car because buyers wanted to get title immediately, and bank had the title, i lost two buyers like that, i have just $1500 in my checking account at best, and it was impossible for me to get the title on my own.. i took $12,000 from my friends, put it in my checking account, sent personal check to financing company, and they sent me the title.. after i sold the car i got cash from the buyer, and returned most of it to my friends, minus the downpayment for the car... i never had any money, and i still don't, i just have a car payment...

am i in trouble now ?

[mom2three09]

If doesn't matter if you do chap 7 or 13 you need to wait 90 days to file after buying a car.

why is that? We just filed last month and 3 wks before filing dh sold his truck & bought another one (it's exempt).... our attorney said not to worry about it (just had to provide the buyers info so it could be listed in our schedules). We also surrendered a vehicle and then bought another one with a lower payment right before filing (not a problem since we financed it & are reaffirming it).

[jribe]

this sounds scary... could you tell me more about this ?

i couldn't sell my car because buyers wanted to get title immediately, and bank had the title, i lost two buyers like that, i have just $1500 in my checking account at best, and it was impossible for me to get the title on my own.. i took $12,000 from my friends, put it in my checking account, sent personal check to financing company, and they sent me the title.. after i sold the car i got cash from the buyer, and returned most of it to my friends, minus the downpayment for the car... i never had any money, and i still don't, i just have a car payment...

am i in trouble now ?

yes you're in trouble. I hope you will be filing with an attorney? two things come to mind: 1- the "loan" from the friends may be considered income for your 6 months ( i say may, but it's probably more like 90% chance) and then you paid them back. the trustee will want that money back. You'll need to wait at least a year; and even then may not be safe. Whatever you do though, i wouldn't file without an attorney,

[kingofsnakes]

yes, i will be filing with an attorney... but i haven't done anything yet.. i guess i will go talk to my lawyer about all of this..

[justbroke]

Ouch, yes, paying your friends so close to filing is not a good thing.

First, the money your friends gave you is an unsecured loan. Since they didn't file a lien on the car title or other personal or real property, the loan is unsecured. When you paid back the lender and received title, that was okay. However, you took the proceeds of the sale, and paid back an insider (your friends) on an unsecured loan without paying any of your other unsecured creditors. This makes it a preference. Whether it is an insider preference or not is debatable.

If your lawyer feels it's not an insider preference, you wait just 90 days for it to "roll off" the radar... before filing. If it's an insider preference, it gets more hairy.

While it may be a preference, the U.S. Trustee (UST) isn't going to come after you for the money. The UST is going to go after the friend(s) that you paid back. The UST will first ask nicely in a letter. If the friend(s) doesn't cooperate, the UST will sue them.

In the end... time heals most pre-Bankruptcy issues. You're probably at least a month or two away from filing anyhow, so this may be a non-issue. The real question for me, and your lawyer, will be if your friends are consider insiders for purposes of the avoidance power of the U.S. Trustee.

[TBLTZ]

why is that? We just filed last month and 3 wks before filing dh sold his truck & bought another one (it's exempt).... our attorney said not to worry about it (just had to provide the buyers info so it could be listed in our schedules). We also surrendered a vehicle and then bought another one with a lower payment right before filing (not a problem since we financed it & are reaffirming it).

You are not suppose to make any big purchases before you file. My Attorney will not file until 90 days after we have our car. Maybe it depends on your state? Or maybe the trustee doesn't care. Im trying to do the same thing but that said wait 90 days.

[keepmine]

You are not suppose to make any big purchases before you file. My Attorney will not file until 90 days after we have our car. Maybe it depends on your state? Or maybe the trustee doesn't care. Im trying to do the same thing but that said wait 90 days.

This may be a pratice that your attorney recommends but, nowhere in the bk code does it place a time or dollar limit on secured debt prior to filing.
Exception of course being cc transactions for luxury purchases and balance tra nsfers.

[TBLTZ]

This may be a pratice that your attorney recommends but, nowhere in the bk code does it place a time or dollar limit on secured debt prior to filing.
Exception of course being cc transactions for luxury purchases and balance tra nsfers.

hmmm. I though any big purchases could be questions within 90 days secured or not......I might have to think about this now

[justbroke]

hmmm. I though any big purchases could be questions within 90 days secured or not......I might have to think about this now

Only unsecured debt is questioned. Secured debt is, well, secured.

[Amy26]

I didn't wait 90 days after buying a car to file.

[kingofsnakes]

Ouch, yes, paying your friends so close to filing is not a good thing.

First, the money your friends gave you is an unsecured loan. Since they didn't file a lien on the car title or other personal or real property, the loan is unsecured. When you paid back the lender and received title, that was okay. However, you took the proceeds of the sale, and paid back an insider (your friends) on an unsecured loan without paying any of your other unsecured creditors. This makes it a preference. Whether it is an insider preference or not is debatable.

If your lawyer feels it's not an insider preference, you wait just 90 days for it to "roll off" the radar... before filing. If it's an insider preference, it gets more hairy.

While it may be a preference, the U.S. Trustee (UST) isn't going to come after you for the money. The UST is going to go after the friend(s) that you paid back. The UST will first ask nicely in a letter. If the friend(s) doesn't cooperate, the UST will sue them.

In the end... time heals most pre-Bankruptcy issues. You're probably at least a month or two away from filing anyhow, so this may be a non-issue. The real question for me, and your lawyer, will be if your friends are consider insiders for purposes of the avoidance power of the U.S. Trustee.

Justbroke, thank you for such a detailed answer...

would it matter to UST that i am current with all my 11 credit card accounts worth $53,000, i never stopped paying minimum payments, and i never missed a single payment to any of them ? it's not like i am hiding from my creditors while giving thousands of dollars to my friends, not at all..

would be nice to know your opinion...

and btw, thank you everybody for participating in this thread..

[justbroke]

would it matter to UST that i am current with all my 11 credit card accounts worth $53,000, i never stopped paying minimum payments, and i never missed a single payment to any of them ? it's not like i am hiding from my creditors while giving thousands of dollars to my friends, not at all..

No. The UST is there to maximize the benefit to the unsecured creditors. Just think, although you haven't missed any payments on $53K... you'll be discharging that entire $53K! This doesn't make the UST any "nicer" about preference payments. Remember, the UST's job is to find money for the unsecured creditors (and himself).