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Chapter 7, Can I qualify?

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    Question Chapter 7, Can I qualify?

    I am considering filing for Chapter 7, but am not sure if I qualify. I'm retired, and widowed, and on SS and pension. I've done some research, but I'm still unclear on the details. I will be receiving a settlement for a car accident in the next few days. Its not huge but is big enough to pay off my car loan for $11,000 and keep some in a rainy day fund. I actually owe $23,000 on the car right now. That would help me on monthly expenses to get rid of that payment (even though insurance is a bear) , but is it the wise thing to do right before filing. I do want to keep the car, but it's value would be higher than the amount allowed if I pay it off, and I've read that if you do not get behind in your payments, you can continue to pay after discharge. And I've read about reaffirmation loans where you just pay off the value of the car or something and then do a redemption loan through another company. I'm confused how to figure out the best way to go.
    1. If I pay off my car, will the court say it is a preferential deal. The payoff amount also includes a long term warranty and gap insurance. I would want to keep the warranty. If I don't pay it off, is it ok to keep making payments to this creditor only so I don't get behind?
    2. Am I able to spend all or part of the settlement money, or is there again a wait that would cause that to be a non-issue when looking back?
    Thanks for your help, I'm someone who like working out all the details ahead of time!

    #2
    Welcome to BKForum!

    Originally posted by Needful View Post
    1. If I pay off my car, will the court say it is a preferential deal. The payoff amount also includes a long term warranty and gap insurance. I would want to keep the warranty. If I don't pay it off, is it ok to keep making payments to this creditor only so I don't get behind?
    Paying off a secured creditor is not a preference. But, if there isn't a large enough exemption to protect your $23,000 vehicle, then you just wasted as much as $23,000.

    Originally posted by Needful View Post
    2. Am I able to spend all or part of the settlement money, or is there again a wait that would cause that to be a non-issue when looking back?
    You can always spend your settlement money on necessities. I would, however, seek a consultation with a bankruptcy attorney. If the settlement money has been categorized and earmarked, example some of it is for pain and suffering, you may be able to exempt some or all of the settlement. This requires a bankruptcy attorney to look at the exemption laws in your State and then to apply any exemptions related to settlements.

    Before you spend any of that settlement I would speak with a bankruptcy attorney. Kentucky allows a debtor to choose between the Kentucky or the federal bankruptcy exemption law. From my glance, if you chose the federal exemption scheme, it protects up to $23,675 in a personal injury "award." Now, I don't know if settlement is the same as an award or if it's a term of art meaning the same thing. Additionally, you "may" be able to protect some or all of the vehicle using the so-called wildcard under the federal scheme.

    So, I hope that helps you understand the issues a little better.

    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.

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