Questions about paying off car POST-341 / PRE-Discharge...

[postie]

Hi all,

I've had my "Less-than-2-minute" 341 meeting (for Chapter 7) last week and I should be expecting my discharge papers in about 60 or so days.

Now my mother wants to help by paying off my car loan in FULL with no strings attached, no re-payments whatsoever. This auto loan is/was/will NOT be reaffirmed but intend to keep since I need it for commuting. I'm guessing my auto loan balance is almost $10,000.

So my question? Can she offer to do that for me and how it will affect my post 341 meeting and upcoming discharge? Should I wait until after I get discharge? or wait until 180 days post BK has passed?

Thanks!

[despritfreya]

Please ask a California bk attny this question.

I never believe it is a good idea to pay off an asset until the case is CLOSED or the property is otherwise abandoned by the Trustee. Ninth Circuit case law gives the appreciation in value of an asset of the bk estate that is in excess of an allowed exemption to the Trustee. My fear would be that if you pay off the vehicle before it is no longer asset of the estate, and, as a result, create "equity" in the property that is above your allowed exemption (whatever that amount is), the Chapter 7 trustee could take the vehicle. You really need to determine if this is a possibility before you do anything therefore please contact a California bk attny.

Des.

[justbroke]

Just to extend what Des aptly wrote, why would you even rush to do this anyhow? I would have, even before reading Des' response, suggested that you wait until after the discharge in entered. I don't see any compelling reason to do this now.

What I would say is this. You may be able to redeem the vehicle. I would certainly talk to my attorney about redemption. A redemption would allow you to pay current market value for the car rather than the balance on the note. In some Districts, like Florida, the value is the "wholesale" value and not the retail value, so you could get the car cheaper than the $10,000 balance you estimate.

I suggest speaking to your attorney regarding redemption, because I would not want to see you waste money when redemption is an option in Chapter 7 cases. There are very specific steps for a Redemption and your attorney would need to move quickly since you're already post-341 meeting.

justbroke's thoughts: redemption under 11 USC 722 is available in Chapter 7 cases. It allows you to pay "wholesale" value -- in most Districts -- for an asset which you want to keep in the Chapter 7. In almost all cases, the debtor seeks new financing of the redemption value through a third party. That third party is typically a bank, such as USBank's 722 Redemption, but it could be a relative. The debtor seeking to redeem must file a Motion to Redeem and set it for hearing. In my bankruptcy, I did the Motion to Redeem and the lender rejected my valuation. Then, 1 week before the hearing, agreed to a LOWER value than what I had! I redeemed the vehicle using a 722 Redemption loan from USBank's "722 Redemption Funding" division. Your mileage may vary. (Pun intended.)

[postie]

I wasn't rushing to have it paid off. I said My mother offered to pay it off for me and that's why I wanted to ask you all on this forum and I am awaiting reply from my attorney on this.

Thanks

[justbroke]

I apologize, but the question was about paying off the car between the 341 Meeting and the actual entry of the discharge. That would be rushing to any bankruptcy attorney and any layperson. We always try to temper a "rush" to get something purchased, sold, traded, financed, before entry of the discharge.

I personally use the term "rush" -- in the bankruptcy context -- to mean doing something before entry of the discharge order or case closing.

[postie]

No worries, justbroke, So is it better to wait till after I get the discharge papers and then let my mother take care of it afterwards?

[justbroke]

postie, based on what Desprifreya wrote, it would be after the case is closed. (Technically, you could to this after abandonment by the Trustee, but that's hypertechnical and you'd have to determine whether the Trustee actually abandoned the asset. The asset is automatically abandoned upon "close" of the case -- unless the Trustee had administered the asset.)

Waiting would be the best and least stressful of the options! In most Districts, the case is automatically closed upon discharge if the case is a "no asset" case.

[postie]

Thank you. I'll report back when I hear back from my "busy" attorney (he's really cool!)

[postie]

My attorney said that's fine BUT wait till I get the discharge paper! :-)