Oh no! I think we really screwed up!!! Re: car allowances

[basketsbears]

Hi,

As some of you know we have purchased a new truck. In reading another post today, I am worried that our new payment is over the allowance. So, how does that play in our filing??? Our Jeep that can be crammed down, if we are in a 13, has a payment of $495, is over 2.5 years into loan. Our new truck payment is $630. We did not realize that the payment had to be under the allowance. ugh. Now what happens?

We retain our attorney on Thursday, so will know more then, but I am now so nervous. Also, Jeep is in both our names, truck is in my name only. As I've said in other threads, the reason we are filing is because of rental home (in husband's name) is being foreclosed on. All attorneys we have talked with have advised us to file jointly as most unsecured credit is in my name as my credit was "better", etc. Now, if we goofed up in buying this truck what will happen? Will tt take it back? Can we just keep it and pay on it? Am I worrying too soon????

Thanks and sorry for being so anxious. It just seems like we start forward and go a mile backwards.

[mountanddo]

Not to be harsh here but how could you not know that your car payment had to be under the allowance. You spent 1 1/2 hours with an attorney just on the 14th of December. Did you not ask how much you could spend on a vehicle knowing you were probably going to be in a chapter 13? Before I had bought anything I would of known exactly how it was going to affect my bankruptcy. I guess I just don't understand why people do things without knowing clearly what the ramifications are going to be. Didn't your DH trade in his truck for this new one? I'm sure that is now gone. I'm sure someone will give advice on how to fix this but why did you jump the gun without knowing all the information?

[basketsbears]

I know I know. I am beating myself up right now. All the attorney said was if we could make the payment. We can make the payment. I am feeling so sick right now, so not too sure about anything at all. On the Nolo site it said the full amount of car loans are taken off, so didn't really think too much of actually being over the allowance until I read some posts here today.

If we are in 13, and Jeep gets crammed down, in combining both vehicles would probably be under allowance. But I am just getting more and more confused, sick and upset with myself.

[mountanddo]

People must make a lot more money than I do because your two car payments are more than one of my checks. That's neither here nor there in this conversation but I'm amazed at what people will spend (or are able to spend) and they are filing chapter 13. After paying my dmi to the trustee I have about $150 left for the month for everything else like food, gas etc. I don't even have a car payment because I couldn't afford one and forget having a entertainment budget! My netflix subscription is all I have and an occasional downloaded video game. Going to McDonald's is a treat for me. But I guess the point is that if the cars can be taken out of your dmi and you can have them and then figure your dmi then that is a good thing. I certainly think I have to find another job!

Don't panic right now. Maybe it will be ok and combined you can have both of them and still have a feasible plan.

[basketsbears]

Thank you. Yes, we are fortunate to have a decent income. Not rich at all by any means. Right now, I'm going to graduate school and working.

[newbie2]

More than likely you are going to get an objection from either a creditor or the trustee because of the high new truck payment. What you may be able to do is to adjust the rest of your budget to make up the difference in the allowed amount and your payment so that you can keep the truck. Otherwise be prepared for the trustee to want you to surrender it. (The approximately $130 per month over the allowance is equal to $7800 more to your unsecured creditors. That's quite a bit of money that the trustee is going to want to disburse.)

[keepsmiling]

OH CARP. So sorry this kinda backfired.
This may be a stupid question but... is it possible to go back and redo the financing? drag it out for longer or put more down?
Just wondering.
Guess we should have told you to read up more on the subject. Sorry about that. There is a fair amount of discussion on the topic.
There is just soooo much to know to be prepared. Your lawyer should have warned you too.

[momofthree]

Since you have 2 auto loans with the total of the 2 payments below the national standards (once the Jeep is crammed down and re-amortized over 5 years), you may have a fighting chance. This is something you need to discuss with your attorney.

[justbroke]

Well, let's step back for one quick moment on the new car financing. If that's for a 3 year term, then you may be okay. Additionally, and perhaps more importantly, a Chapter 13 automatically "refinances" the vehicle. Not only do you "refinance" the term to a "new" 60 months, you also get to change the interest rate to Till. I think that Till rate is about 5.25% right now. Both those facts could greatly reduce the payment amount.

Of course your attorney knows exactly how to include the car in the Plan and use the Till rate instead of the current contract rate.

Here's an example. If you purchased a car for $25,000 at 17.5% interest rate with a term of 5 years (60 months), the payment would be $628.06. However, under Till, you can change that interest rate to 5.25%. The payment would become $474.65 using the Till rate in a Chapter 13 bankruptcy. That would be less than the national car allowance of $496/month and, of course, within the allowance.

[spidge]

Well, let's step back for one quick moment on the new car financing. If that's for a 3 year term, then you may be okay. Additionally, and perhaps more importantly, a Chapter 13 automatically "refinances" the vehicle. Not only do you "refinance" the term to a "new" 60 months, you also get to change the interest rate to Till. I think that Till rate is about 5.25% right now. Both those facts could greatly reduce the payment amount.

Of course your attorney knows exactly how to include the car in the Plan and use the Till rate instead of the current contract rate.

Here's an example. If you purchased a car for $25,000 at 17.5% interest rate with a term of 5 years (60 months), the payment would be $628.06. However, under Till, you can change that interest rate to 5.25%. The payment would become $474.65 using the Till rate in a Chapter 13 bankruptcy. That would be less than the national car allowance of $496/month and, of course, within the allowance.

If only it was explained like this before I would have bought a newer or new car too. Water under the bridge though.
Could the original poster be allowed to keep the car if they make the higher trustee payment showing the overage in allowance.

[keepsmiling]

Wow even I would consider a 13 lol for that deal!
Could that be a sticky? (if it's not already)

[justbroke]

If only it was explained like this before I would have bought a newer or new car too. Water under the bridge though.
Could the original poster be allowed to keep the car if they make the higher trustee payment showing the overage in allowance.

The key in a Chapter 13 is that you are not affecting what the unsecured creditors would receive. A Chapter 13 plan can always -- for the right reasons -- be approved and confirmed over the objection of the Trustee or the creditors.

To that extent, you could actually have a car payment over $496/month so long as the difference is given as "disposable income". Example, let's say your disposable income (DMI)is $100/month. Let's say that you have a car payment of $596/month (after the Till adjustment and "re-amortization"). That's $100 over the allowance. You would need to take that $100 and add it to the DMI to make your payment to the unsecured creditors $200/month. Of course, you'd need to shave something in your budget, but that's how you would do that.

In the end, can you actually live with an additional $100 taken out of an already strict budget (Chapter 13 plan)?

[basketsbears]

I'm A little confused. Our jeep has about 43 (?) payments left. I know we can cram that down, even the new truck???

Also we don't know if we are 7 or 13. If it turns into big deal may just see about husband filing alone.

I feel like an idiot. Thx for all the assistance.

[justbroke]

I'm A little confused. Our jeep has about 43 (?) payments left. I know we can cram that down, even the new truck???

A debtor can not "cram down" a "new" vehicle. Just as background, new vehicles are known as 910-vehicles in the new Bankrutpcy code. The term 910-vehicle comes from the fact that they were purchased within 910 days of filing. In the current Bankruptcy code (BAPCPA 2005), those vehicles (910-vehicles) are treated differently. You can't cram them down to their actual value. However, the Till interest rate can be applied!

So, not only can you cram down the jeep to the actual current market value, you get to re-amortize it to 60 months (5 years) and change the interest rate to Till (about 5.25% today). (If you're in a 36-month plan, the term -- in months -- would be 36 months. However, for purposes of the Means Test, everything is calculated on a 60-month term.)

basketsbears, please know that I performed a minor calculation on your jeep. Whether this is a 60-month loan with 43 months (510 days old) left, or a 72-month loan with 43 months left (870 days old), then you can't cram it down. You need to have had the load for 910 days in order to allow a cramdown, or meet one of the few exceptions. (One exception is a refinance. Additional exceptions include a vehicle not purchased for you or your family/household use; think work vehicle.)

[basketsbears]

The jeep we have had for 910 days. The interest rate is 9.9. The truck we just purchased in December. Thank you!