Rats! I need a new car and I’m stuck in Chapter 13

Posted by Robert Weed / in Blog, Chapter 13, Chapter 13 Bankruptcy, Weekly Posts /

Do You Need to Finance a Car in Chapter 13?

The last thing you want to do is get further into debt while you are in Chapter 13.  (The goal of Chapter 13 is to get out of debt.)  But sometimes you need to–most often if you need to replace a junker car.

There are two things you need to know about financing a car while you are in Chapter 13?

First, car dealers are surprisingly eager to finance a car for people in Chapter 13.  That’s because they figure people in Chapter 13 are trying to get their lives together; but also people in Chapter 13 are stuck paying high interest rates, so those loans can be very profitable.

Second, you do need court approval to finance that car.  (The finance guys at the car dealerships usually know that and will tell you to get a letter from the court.)

Approval from the judge takes about four weeks

You need to get approval from the judge–that takes about four weeks–if nobody objects.

Here’s the info we’ll need from you, so we can put it in front of the Chapter 13 Trustee and the judge.

 

Five things we’ll need to explain to the judge and the trustee and yourself

1.  Why do you need a new car. If you had a car when your bankruptcy started, what happened to that one?
2.  What kind of a car do you want.  What’s the year, make and model.  (This court will never approve a luxury brand. And they won’t approve a souped-up economy brand either. )  What are you going to pay; where did you get the down payment, what’s the interest rate and monthly payments.  The dealership will need to give you that info. We’ll need it on their letterhead.
3. Now in three weeks that car will be gone, so don’t get attached to it.  But you’ll have court permission to get a similar car.
4. How can you afford this car? This court will never let you lower your bankruptcy payments no matter how much you need a car.  They will also turn you down no matter how much you need a car if they think you can’t afford it. So this needs a lot of explanation.
5. Is getting a car loan at a terrible interest rate really something you need to do.  Is there a way to keep your old car running a little longer?  Do you have some cheaper way to get around until your bankruptcy case is over? Are you really being smart here?

 

 

Chapter 13 Payment Information

Posted by Robert Weed / in Chapter 13, Chapter 13 Bankruptcy /

Here’s How You Can Make Your Chapter 13 Payments in the Alexandria VA Bankruptcy Court

The bankruptcy law tells you to make your first Chapter 13 payment one month after your bankruptcy case is filed.  If you forget, or bounce, your first payment, the Chapter 13 trustee can dismiss your case. (That means DO NOT wait until your Chapter 13 plan is approved–that will be three or four months down the road. Start making payments now!). That’s by law. 11 U.S.C. § 1326(a)(1).

When the Court confirms your plan, then the trustee may issue a “wage directive” to garnish the payment from your paycheck. If that doesn’t happen, you need just to keep making those payments.

Ten Things to know about how to make your Chapter 13 payments:

1.The Alexandria Chapter 13 Trustee, Thomas Gorman, does not accept cash, credit, or debit cards. He also won’t take online or telephone payments.  Mail your payments to his address in Memphis. (That bank in Memphis handles the payments for most of the bankruptcy courts in the country.)

2. Do not send money orders. They are too difficult to track down and get your money back if they get lost in the mail.  Instead, I suggest setting up a bill pay with your bank. With bill pay, your bank mails the check. You can watch your account and see when the check clears.  

3. Don’t send a post-dated check. The Memphis bank will deposit it as soon as they get it. So, don’t send your check until you’re sure it’s good.

4. The bank won’t put a bounced check through a second time. Just send a new check.

5. Don’t use UPS or FedEx. The payment address is a PO Box in Memphis. UPS and FEDEX don’t deliver to PO Boxes.  

6. If you bounce your check twice, then Thomas Gorman will make you to send all future payments by money order or cashiers check. That’s an enormous waste of time. It’s better to be late than to bounce a check.

7. If your check doesn’t clear your bank, don’t call to ask the Trustee if they got it. They don’t know. That bank in Memphis is handling over a hundred thousand Chapter 13 payments every month! If the bank doesn’t deposit your check, then you know it’s lost in the mail. Send it again.

8. Make your check payable to: Thomas P. Gorman, Trustee

9. Include your NAME and CASE NUMBER on your check. For bill paying purposes, your case number is your account number.  If you get that wrong, your payment might go to the wrong account.  People mail three thousand checks every day to that bank; so make sure yours has the right account number.

 

10. Mail all payments to the payment address at:

               Thomas P. Gorman

               Chapter 13 Trustee

               P.O. Box 1553

               Memphis, TN

                      38101-1553

And Remember to Pay:  

Trustee Gorman will not send you a monthly reminder or call when you are late. It is up to you to make sure he receives your payment every month.

 

Once Up an Time: A Chapter 13 Story

Posted by Robert Weed / in Chapter 13, Chapter 13 Bankruptcy /

Once up a time: Widow Anna saves her house and clears her debt with Chapter 13.

Once up a time, an elderly widow named Anna needed to replace the HVAC in her townhouse. Her air conditioning broke down and she needed to fix it.

Anna was poor.  She had $1404 monthly from her retirement and $1232 from social security.  Her credit score was dragged down by the $33,000 she had on credit cards—even though the cards were all still current.

Mean Boys LLC offered to install and finance her HVAC—they put her in a seven-year lease for the HVAC at $146.00 month. It was a lease, not a purchase. At the end of the seven years (after paying $12,264) it would still NOT be paid for.

Anna didn’t have much choice—she needs to have AC in the summer and heat in the winter. But when she started to pay Mean Boys, her credit cards fell behind.

No wonder Anna’s credit cards fell behind! Her minimum payment on the credit cards was $991.

After paying her mortgage, her condo fee, and Mean Boys, she only had $967 left over.  She had to eat and pay utilities and car insurance, before trying to pay those credit cards.

That’s why Anna came to talk to Nice Bob, a bankruptcy lawyer.

Anna’s Chapter 13 payment plan $891 a month

Nice Bob, the bankruptcy lawyer, put Anna in a chapter 13 payment plan.  (Virginia law is NOT favorable to widows—or other single people—who want to file Chapter 7 bankruptcy and keep their house. That’s why Anna chose Chapter 13.) Chapter 13 is a payment plan. Nice Bob was able to get Anna approved for a Chapter 13 payment of $100 for 36 months.  That was $3600 to clear $33,000 in debts.

Nice Bob also set a trap for the Mean Boys, LLC.  Chapter 13 does NOT help a consumer who needs to reduce the payment on a lease.  (And Mean Boys LLC had very good lawyers—their HVAC lease was a very strong lease.)

Mean Boys LLC fall into Nice Bob’s trap

Mean Boys—sure enough—fell into the trap that Nice Bob set. They made a mistake and violated the “automatic stay.”  They could end up owing Nice Bob a couple thousand dollars in legal fees.

Nice Bob didn’t want those legal fees. Instead, he wanted to pressure Mean Boys to help Anna.  And that worked! Mean Boys agreed to cut their payment in half—from $146 a month down to $73. (That saved Anna $4234 over the remaining months of the lease.) 

Now Anna, our elderly widow, can keep her house, and her AC and heating. And live happily ever after.

PS This is a once upon a time. Any similarity to any living person or business is purely coincidental. 

 

(PPS.  Homeadvisor.com says the average cost of installing an HVAC system is $5845.  Anna’s condo is quite small, so a fair price might have been less than that average.)