Buy a new car to qualify for Ch7?

[backtoschool]

Interesting. I don't know that I guess luxury is subjective. A 40k car would go a long way to get me to pass the means test. I drive a VW GTI now, car costs $28k. I make over $100k/yr, not sure if taking on a car thats $12k more is excessive, but I realize thats up to the UST and it could be shaky grounds. There are alot of pickup trucks with extended cabs that cost more than $40k.

Taking on more debt before filing and especially after you have talked with a lawyer would be looked at very poorly by the US Trustee.

You are technically insolvent right now by definition (90 days before filing=insolvency) so taking on a higher car payment for no reason other than to get your expenses up will not go unnoticed by the US Trustee who has seen it all.

I think it would be a huge red flag, just my opinion.

[signal]

Interesting. I don't know that I guess luxury is subjective. A 40k car would go a long way to get me to pass the means test. I drive a VW GTI now, car costs $28k. I make over $100k/yr, not sure if taking on a car thats $12k more is excessive, but I realize thats up to the UST and it could be shaky grounds. There are alot of pickup trucks with extended cabs that cost more than $40k.

[backtoschool]

Here is a case where a high income chapter 7 filer was dismissed for "totality of circumstances" for having too high a car payment. (amongst other things...)

http://www.bkforum.com/showthread.php?t=43840

A luxury car payment will be a red flag for the trustee.

[StartingOver08]

Well, according to this link the allowed amount is $478/month http://books.google.com/books?id=Uhk...ruptcy&f=false BUT you may be right that you can use any amount in your payment. Take a look at this link below:

http://www.judicialview.com/Court-Cases/Bankruptcy/IRS-Manual-Not-Used-to-Determine-Bankruptcy-Standards/7/4094

[signal]

According to the below, from www.legalconsumer.com, there is no limit on deductions for auto loans. perhaps I am reading this wrong, but thats what it sounds like to me, see below:


Subpart 5C: Deductions for Debt Payment

The means test places no limits on deductions for mortgages or car loans. All secured debts for a car or home can be deducted.
If you are claiming deductions for payments on property that you plan to surrender to the trustee during bankrupcty, note that many courts will not allow that deduction. Check with an attorney in your area to determine what courts allow in your area.
Some commentators suggest that more people will be able to file for Chapter 7 under the new law, because, under the old law, the "reasonableness" of such expenses was considered by the judge. See editorial by James P. Caher, Why the Means Test May Mean More Chapter 7 Filing (and Other Unintended Consequences of Bankruptcy Reform), BestCase Scenarios, Summer 2005, (newsletter for owners of BestCase bankruptcy software).

[tdawg]

I ran the means test at NOLO www.legalconsumer.com

It said I had disposable income, my car payment currently is 450/mo. However, If I had a 750/mo car payment then I would no have any disposable income.

Wouldn't it make sense to go out and buy a new car, right about 750/mo, then I would fail the means test? I still have excellent credit, I am just out of rope, and my business has failed, but I am sure I could swing the loan. Not sure if this is a strategy however, and will talk to a lawyer about it. Any comments?

Signal

If you intend to pay the car payment, then you should be fine. If they could prove that you knew you would be filing and not pay the car payment, then you could face scrutiny. I would think you might be a little safer from being scrutinized if you make sure you wait a few months to file after you buy the car. Remember though that they might not allow all of that payment on the schedule J. But from what I've read, you should be fine on the means test.

[StartingOver08]

There is a limitation on the amount you can spend on a car payment and still have it accepted by the trustee. I believe that limitation is $489/mth for a car payment. One of the others will jump in here to confirm or correct shortly.

You want to find expenses that you pay, but maybe have forgotten to list in your schedule - annual expenses usually get forgotten (tag registrations and renewals, lic renewals etc) Search this forum for 'expenses' and you will get quite a wide variety of expenses. You can pick up term insurance if you don't already have any...there are quite a few ideas to bring your expenses up so you can get your DMI down.

[signal]

I ran the means test at NOLO www.legalconsumer.com

It said I had disposable income, my car payment currently is 450/mo. However, If I had a 750/mo car payment then I would no have any disposable income.

Wouldn't it make sense to go out and buy a new car, right about 750/mo, then I would fail the means test? I still have excellent credit, I am just out of rope, and my business has failed, but I am sure I could swing the loan. Not sure if this is a strategy however, and will talk to a lawyer about it. Any comments?

Signal