Car loan from a family member?

[BlueBuffalo]

I am going to be filing CH 7. I need to get a vehicle as mine is going to be repossesed very soon....a week or so. I am unable to get a car loan even with a co-signer and I do not have any additional cash to purchase anything outright. I have a family member that is willing to buy a car for me, but if I make the payments isn't that considered paying an insider? Can I rent the car? Can we do up a loan between the two of us through a lawyer to make it legit? Is there anyway I can make this work?
Has anyone else done a loan from a friend of family and drawn up papers and had that accepted by the trustee? I don't want him to have to pay the court back when all he is trying to do is help me out.
I realize he isn't a bank but how is this different than if I went out and got a car loan from a bank?

[reeltrouble]

From my understanding, as long as the family member who finances it for you files a lien against the care for what you borrowed, you are OK, and can reaffirm the debt like any other secured debt, but I could be wrong...Keep in mind that if you owe less than what it's worth, that will be considered an asset

[AngelinaCatHub]

Nice try, but at this time, he will be a secured creditor and stuck in the bk. He may get only a portion of his debt. The person is fine in his act but in my opinion, if he would consider it a gift, (and you have to list it), and pay him some time in the future, after your bk is long gone, I cannot see a problem. Anything given to you now, is income. If the car is very inexpensive it is exempt. If not it could cause you a problem. 'Hub

[AngelinaCatHub]

From my understanding, as long as the family member who finances it for you files a lien against the care for what you borrowed, you are OK, and can reaffirm the debt like any other secured debt, but I could be wrong...Keep in mind that if you owe less than what it's worth, that will be considered an asset

I agree. 'Hub

[BlueBuffalo]

I'm sorry but I'm confused by the answers.
Here was his original proposal....He titles it in his name so there is no question about who paid for it, he is writing a check out of his home equity line and I was going to cover that increase. We were hoping to be able to write up a loan through a lawyer and once the car is paid off then he will transfer title to me. I would be responsible for the car insurance and repairs.
From what reeltrouble posted it sounds like I "may" be able to have him title it to me but place a lien on the vehicle. There will be no equity in the vehicle as I am not making a down payment.
Does that sound right or am I misunderstanding? I know I need to contact a lawyer but I haven't gotten quite that far yet...not enough money to retain someone just yet. I just need to handle this car situation asap and don't want to make a huge misstep before I've even gotten the ball rolling.
Thanks.

[doingpoorly]

I needed a car as my other one was going to be repoed and so I had my mother loan me the money because the car I wanted was a $2700 1999 model. No one will write a loan for that so my mom loaned me the money and bought the car for me. I am on the title and she is listed as a lien holder. The lien was perfected and everything seems to be in order. We also drew up a promissory note and payment schedule. (My attorney did it for us, no extra charge) My payments are very inexpensive and the tt didn't bat an eye at the expense and everything was documented that I paid my mom (insider) each month for the car. I bought it and made payments for 2 months before I filed. My attorney said that this was a fine plan for me and that the tt wasn't an idiot and that he would understand why I did what I did.


I am not exactly discharged yet so I can't say for sure that what I did will cause me no problems but I am noted as being no asset and the tt didn't have any questions regarding my car loan.

Ask your attorney to see if your plan will work for you. Best of luck.

Oh, one more thing...my car was financed for about $800 less than it is worth. So I only have $800 in equity in it. (Fl only has a $1000 exemption anyway)

[BlueBuffalo]

Doingpoorly, thank you for your post. I will call a lawyer and see if this scenario will fly here in MN.
Thanks to all who responded, hopefully I can make this lien holder and note payment idea work as I do need to have a car payment to pass the means test, I think. Even though my income is below the maximum allowed to file Ch 7.
If anyone else has information or thoughts I would appreciate your experience or knowledge.

[OhioFiler]

You can borrow money anywhere you like to purchase a car, including family and friends. Realize the loan will be discharged in the bankruptcy.

[StartingOver08]

OP, doingpoorly has it right. It works because the loan is properly documented in writing and the lien is perfected and the payments are actually being made to the family member in accordance with the note. Lien perfection and a written note are important so that your payments are an allowable expense in the BK. If the lien is not perfected and the title is in your name than there are issues too - unless the entire vehicle can be exempted.

If you try it with your original solution, your payments would not be an allowable expense because essentially the vehicle belongs to your family member as evidenced by the title. Make sure the lien is recorded with the DMV before filing. Read more about perfecting the lien here: http://www.moranlaw.net/car-ownership.htm

Yes the loan is/can be discharged in Bk. But you can voluntarily make payments to your family member until the loan is paid off - just like a regular ride thru.

[BlueBuffalo]

Startingover...thank you so much for confirming and for the link, that was super helpful!! I will be sure to follow all this!!
Thank you again everyone!!