Protecting the equity of new car

[river147]

Need some advice pretty quickly PLEASE!!! I sold my car and put down only 3k on the new car.
My state allows 3k exemption on vehicle. I will be a single filer on chapter 7.
My husband is financing the new car because my credit has tank. Should I be a cosigner on this new loan and should my name be added to the title?
I will be making the payment even though my husband is financing it. I just want to know how I can protect this car once I file chapter 7? I had 12k equity in the old car and was trying to protect from losing it. I'm using the remaining funds to pay sales tax and tags for new car. Will this raise any flags with the trustee? Can the trustee take it if it's titled only in my husband's name?
The sales tax will run about $2500.00 plus registration fees.
Thank you in advance for your feed back.

[JackBondLove]

Need some advice pretty quickly PLEASE!!! I sold my car and put down only 3k on the new car.
My state allows 3k exemption on vehicle. I will be a single filer on chapter 7.

No problem there. The old car simply became transformed into cash. The trustee would have done this for you. Buying the new car is also not a problem as a debtor can buy any reasonable asset that would be exempt (which $3K equity in a car would be for your case.)

My husband is financing the new car because my credit has tank. Should I be a cosigner on this new loan and should my name be added to the title?

If you are trying to establish that it is your car (i.e., to take advantage of the exemption), then it should at least have your name on it, and I would think that the loan should be officially be in your name, just with your husband as cosigner.

I will be making the payment even though my husband is financing it.

Since you are married, it does matter who is actually paying for it, as any income would come from the marriage community.

I just want to know how I can protect this car once I file chapter 7? I had 12k equity in the old car and was trying to protect from losing it. I'm using the remaining funds to pay sales tax and tags for new car. Will this raise any flags with the trustee? Can the trustee take it if it's titled only in my husband's name?
The sales tax will run about $2500.00 plus registration fees.
Thank you in advance for your feed back.

OK, I will presume that you sold the old car for $12K, put $3K down on the new car, and paid $2500 in taxes & fees. That leaves an extra $6500. You will not be able to shield this, just like you will not be able to shield any other cash that you may have in the bank. And the fact that you have sold the car will raise an immediate flag to the trustee, who will ask, "OK, so where is the $6500?" You can't tell him something like, "Oh, it's under my mattress, as I was hoping it would not be noticed." You will have to fork it over.

Had you not sold the car, the trustee instead would have forced you to fork the car over, and after selling it, he would have given you the $3K (that presumable you could have used to buy the car that you have now, although being in the middle of a BK, you probably would have had a much more difficult time getting the loan that you actually did.)

[river147]

Equity from sale of Car

This reply is to jack:
I CANNOT be a cosigner on the new car because my fico was 583. So they left me off the loan and my husband qualify instead. However, he is putting me on the title, being his wife, and we do not live in a community property state.
(Correct me if I'm wrong, Missouri is not considered a CP state).
Now, I have $6500 left after paying the sales tax and tags on the new car which is financed only in his name. I'm about 6-8 months out from filing bk, so this is how I'm planning on using the remaining funds:

1. $1500.00 for new refrigerator(my current one is shot)
2. $800 for new tires on 2nd vehicle(this vehicle is completely exempt because I owe more than what it's worth and it is in my name also.)
3. $3200 real estate taxes
4. $1500.00 attorney fees for filing
5. $400.00 6 months policy on auto insurance
6. $400.00 to catch up on utilities

I think that just about covers the $6500.00

Since hubby is not filing bk 7 with me, I can keep my older second vehicle and just reaffirm the loan. The newer vehicle is in his name only but I did apply $2500.00 towards it for sales tax and $3k down payment.
So, my question is this: Could the trustee demand the $3k and $2500.00 from the new car, to be applied towards creditors? Since the new car is not being financed in my name, will this be an issue? Like I said, We would not have gotten the car if they put me down on the loan. Sorry this is so long, but I have to make this decision today on what to do about the new car and how I should handle the title.

[keepmine]

Not sure it makes any difference. Since you won't be on the loan, you won't be able to use that payment as a monthly expense.
I'd not pay that $2500 to your husband. Pay it to the dealer. That way you avoid an insider payment issue.
Since you won't be filing for awhile you can spend that money as you please as long as you don't write checks to family members.

[river147]

Keepmine,
I have a car payment to show on my expense report. The much older car that is being financed in my name also. This car I know will be exempt from bk. Though I could file on it and cram down the payment but then the creditor would come after my hubby since he's on there as co signer.

You're suggesting that I pay the $2500 sales tax to the dealership directly?
I would rather do that if they will agree to it. Do you think the dealership will allow me to do that?

[keepmine]

You're suggesting that I pay the $2500 sales tax to the dealership directly?
I would rather do that if they will agree to it. Do you think the dealership will allow me to do that?

I can't speak for the dealer but, I doubt they turn down money.

[SMinGA]

I doubt the dealership will care who gives them the cash. It might not be relevant though, since on paper your husband is the one buying the car.

The potential issues I see:

1. you will not be able to claim the new car payment as an expense because its not your obligation. Its your husband's car payment. On the other hand, you won't need to worry about exempting any equity in the car - it belongs to your husband and not you.

2. the trustee may see this as a transfer of assets. You sold a car you owned outright, used those funds in part for your husband to buy a car. The transfer is that you owned a car with excessive equity, sold it and paid ~1/2 of the cash into a vehicle owned entirely by your husband. If his name was on the prior car title - that helps. Otherwise, it just depends on how aggressive the trustee decides to be. No way to know for sure if this will be an issue, but its a possibility. Since you are married, that point could work to your advantage. It would probably be a bigger issue if you did this transaction with another friend/relative.

Have you discussed with your attorney?

You're suggesting that I pay the $2500 sales tax to the dealership directly?
I would rather do that if they will agree to it. Do you think the dealership will allow me to do that?

I can't speak for the dealer but, I doubt they turn down money.

[river147]

Does bk have to be so complicated?? Do you think this equity issue will be questioned 8-10 months from now when I decide to file? If the trustee demands that I pay him back for the 3k that was put down to finance a vehicle for me, then I'll just simply offer to pay him back. The cash that was left over from the sale of my older car will be spent and documented accordingly to show where all the funds went. My husband said he can pay the sales tax himself with his income so that it would not be an issue later. He's making the pymt on the new car that's in his name only, and I'm making the payment on the very old car that is still financed in both our names. So I can at least use one car pymt on my expense report and file on this car to cram down the payment. If push comes to shove, I guess if the trustee wanted to, he can demand I pay back the 3k.

[justbeach03]

I had the same exact question posed to my attorney. filing in single in 8mths, credit is shot, equity in car. He said it would be a transfer of assets and not to do it. My attorney said to sell the car- use the money towards valid living expenses or bills my husband would've normally paid (electric, water, food) and let husband pay the car fees with money he's saving by me paying the others. Think that might work in your case? No asset transfer, no equity in car or payments/creditor to list.

[Fallonedward]

I purchased a new Used car 3 months ago, I'm current on payments and when I declare I want to keep the car, in this case do I reaffirm and keep making payments?