topic Re: Selling a car before filing in Bankruptcy

Selling a car before filing? Secured card before filing for BK?

masscredit — Tue, 26 Oct 2021 04:58:07 GMT

I've been pretty set on keeping both of my cars. One is a 2014 Hyundai (my daily driver) and the other is a 2018 Mustang. The Hyundai is paid off. Looking at KBB, average private party for the Hyundai is $7500. and the Mustang comes in at about $26,500. I owe $19K on this one. The car market is kind of crazy with used car values being inflated because of low supply and high demand. The Hyundai was worth about $5500 when I checked it earlier this year and the Mustang was close to what I owed.

I've been considering selling the Mustang. I like the car but can use the extra funds for living expenses and to pay for my BK. Plus I'll save over $500 per month by not having the car payment and insurance. I've been trying to tighten up my budget so would be a smart move financially. I spoke with one of the attorneys I met with. He said there won't be a problem if I see it as long as I get what it's worth.

The car exemption in my state is $7500. so that would cover the Hyundai.

What do you think?

Re: Selling a car before filing

kr43002 — Fri, 15 Oct 2021 16:19:14 GMT

I believe keeping your attorney in the loop is the best way possible. Every district is different, and every trustee is different.

Re: Selling a car before filing

MoBra — Fri, 15 Oct 2021 21:10:14 GMT

The trustee/ judge will ask you what you sold and how much you made before granting the bankruptcy. I listened while a trustee grilled a woman about a car she sold under the blue book value. He questioned her endlessly about being in need and selling a car for less than it was worth. I don't think he believed her story. They also ask about transferring money or receiving anything over $1000 (something like that)

I filed in Nov discharged in March 2021

Re: Selling a car before filing

FireMedic1 — Fri, 15 Oct 2021 23:21:27 GMT

Selling a vehicle prior to filing for bankruptcy is considered a pre-bankruptcy transfer of property, which can attract the attention of the trustee and potentially put you at risk for accusations of fraud. When determining whether a pre-bankruptcy transfer was inappropriate, the trustee looks at: Whether or not the property would have been exempt had it not been sold. How much money you received in the sale. Why you chose to make the sale. How the proceeds from the sale were used.

Chances are if the vehicle would have been exempt and you received fair market value for the sale, and not go low sale to get rid of it, it’s unlikely there will be an issue other than waiting for the trustee to investigate these issues.

Best advice is your lawyer of course. I just put out fires.

Re: Selling a car before filing

masscredit — Sat, 16 Oct 2021 16:27:25 GMT

@FireMedic1 wrote:
Best advice is your lawyer of course. I just put out fires.

lol!!! I like that! One of the attorneys I spoke with mentioned that having a significant amount of credit card debt along with two cars, one being a nice sports car and me wanting to get rid of my debt with Ch7 might raise some flags. That combined with me trying to reduce my monthly budget has me leaning towards selling it. Plus work has been very slow so I could use the money to cover bills until life gets back to normal. Another incentive to sell it is it's worth thousands more in this market. I bought the car 2 1/2 years ago. Based on the numbers I've been seeing, I can sell it for just a few thousand than I paid.

Secured cared before filing for BK?

masscredit — Mon, 25 Oct 2021 15:25:04 GMT

Thoughts on getting a secured card before I file for BK? I know many will say just file first which I understand. I'm working on things but not ready yet. I curently use my debit card or cash for purchases. There are times when a credit card is needed like for certain travel reservations and there is the added securiety of making purchases with a credit card instead of debit.

Re: Secured cared before filing for BK?

MileHigh96 — Mon, 25 Oct 2021 17:26:21 GMT

Two things that would make me wary. One would be is that even if it is a secured card, the lender may close your account as soon as the BK petition is filed, so it may be pointless unless you can find out for sure from the card issuer. And two, the BK trustee might be wondering why you are opening more lines of credit while knowing you were about to file, even if the card is a secured one.

If you have settled on your BK lawyer now, I would ask them what they think before going ahead and doing it.

Another way that you could do something similar might be getting a prepaid credit card that can be reloaded as needed. I am not 100% sure, but I believe those have the same kind of fraud protections that a regular card does. Plus you wouldn't be tying up money that you may need during the BK process and it gives you the option of any of the big three issuers (Visa, MC, and AmEx) plus they can be picked up at any place that sells gift cards.

Re: Secured cared before filing for BK?

Anonymous — Thu, 28 Oct 2021 03:28:27 GMT

The savings account that secures the card is an asset that may or may not be exempt in the bankruptcy and the trustee can sieze it, in which case the card would get closed. It might get closed anyway.

Re: Secured cared before filing for BK?

masscredit — Wed, 03 Nov 2021 01:46:29 GMT

I'm going to research reloadable cards. I currently have some gift cards that I use for internet purchases and sometimes for purchases while I am out. The only time I've run into a problem using them is at gas pumps. I don't remember if this happens all the time. It asks for the pin number (the cards don't have one) then declines the charge when I try to push by it. I can usually do that in stores. Only a couple of times has it given me a problem.

Re: Secured cared before filing for BK?

masscredit — Wed, 03 Nov 2021 01:53:31 GMT

It looks like my posts were combined so as for the car, I sold it today. I got an amazing offer from CarMax. They paid off the loan and I have money in the bank. From what I've been told by attorneys and have read online, I will keep track of what I use the extra money for. That will mostly be for monthly bills, dental expenses, attorney fees and kid's school expenses.

Re: Secured cared before filing for BK?

FireMedic1 — Wed, 03 Nov 2021 12:09:29 GMT

Congrats on that. Yes keep all reciepts on what is spent on the dispoable income. The main reason not to get credit before BK. Once your DC'ed. Your legally out of debt and your scores will climb a small amount. Will it be enough to get better cards afterwards? Sometimes it does. There is no rush to get credit out of the gate. In fact I've seen it many times on here. People going out and getting 5 cards in a couple months. Its like chill and let your credit rebuild slowly. Its a marathon not a race. Let the smoke clear before you start making moves.