Auto loan with open CH13, without trustee letter?? Please read before judgement.

[Anonymous]

So we are at the tail end of a 5 year chapter 13.  Were able to buy a home (with trustee approval), and open several small lines of credit (also with trustee approval), but we are in dire need of a new car.  In speaking with our attorney and the trustee's office, they are not taking on any new motions to incur debt unless its an absolute emergency (due to covid19 shutdown case backlog).  I would consider ours to be, but they dont.  Anyway, the timeframe to get in front of a judge is well past our discharge (within 6 months), but not nearly soon enough to satisfy the need for a new car.

So heres the question - please no judgement and YES I understand you arent supposed to incur new debt without trustee approval.  I basically was told from the trustee's office to "do what you need to do".  So we are moving forward, trying to get a new car.

Back to the question.  Does anyone know of any CUs or banks that DO NOT require a trustee letter to finance you for a vehicle.  At this point we have awesome credit, income and the ability to put something down.  So none of that is a problem.  But all the lenders I have spoke to require a trustee letter which we will not be able to get.

Im looking for valid info.  You can PM me if you want and let me know what lender approved you without trustee approval.  This is a very unique situation that im sure many are going through at the moment.  And since COVID broke the process and is preventing us from doing it the right way, we need an alternative.  And like I said I have been told - not officially to just do what we need to do.  

Thanks.  Any info would be appreciated.

[Anonymous]

I just finished my CH 13 and within the next few weeks I will have my discharge. I didn't ask my trustee for permission incur any debt from the preceding 43 months. I don't know if I would put your faith in someone from the trustees office telling you in a round about way to do what you got to do without it in writing so it can't bite you later. If it's truly dire I would have your attorney motion the court. When my mom passed last year right as strict lockdowns for COVID started I had to petition the court to keep my tax refund to help pay for the burial and I had to show I had the funds in my savings and to not use it till the plan was officially modified. You are so close to the end I wouldn't jeopardize having the court dismiss your filing instead of discharging. 

Good Luck! 

[jmw1]

Your problem can be solved incurring new debt. Even if you could get a motion to incur debt, most trustees are going to limit you on the amount of debt so you can't buy new. If you have a down payment, the trustee might want to confiscate it just like your tax refund to give it to unsecured creditors. In my district, new is not going to happen covid or no covid.

Why do you need to buy new? Used cars work just fine and it's far, far more common for consumers to buy used rather than new. $4k or maybe even less is enough to get a replacement old sedan without borrowing. You're only buying this to get from point A to point B, not to show it off. You're not living in it.  It's not a forever car. Who cares if it is scratched and has small dings. You do need to have a trusted mobile mechanic check it out before purchase. Lean hard towards makes/models that are known for reliability like Toyota/Honda sedans and avoid unreliable money pits like Chrysler, Mercedes and BMW.

Let's forget about the 13. You are going back to the bad habits that siphon $500-$800/month going to a lender for the next seven years of your life instead of your savings/retirement even if it is a 0% interest. I shake my head at the auto loan approval thread where people are congratulating themselves for $700 payments for the next 5+ years on less than $80k income. The underlying new car depreciates very fast as soon as it leaves the dealership lot so after the loan is done, the car is worth less than $10k.

[Anonymous]

Thanks for the replies people.  And I appreciate the tips.  But like I said we have been all through this.  Anyone else have any actual lenders that they know of that will do auto loans without a trustee letter?  Like I said, you can PM me if you dont want to post it publically.

[Horseshoez]

@Anonymous, I went through this very thing back in 2017 and came up with "zip/zilch/nada/nothing".  In the end I opted to drain my meager savings account and then live on the proverbial "beans and franks" diet for the next month.  Funny thing though, the (then) 11 year old car I bought with (then) 114,000 miles on it, has turned into a keeper.  My Chapter 13 was discharged last year and even though the car now has over 170,000 miles on it, I have no plans on getting rid of it for a number of years yet, if ever.

Sorry I couldn't give you the advice you're looking for.

[Anonymous]

Thanks for the reply, I appreciate it.  People always seem to give that same advice though about getting a cheap beater or fixing the beater if you can afford a down payment on a new car.  But where this bites you is when you have now spent all the savings you were able to scrape together for said beater, or fixing owned beater, and then it dies again leaving you both broke and car-less.  Its too easy to say just wait, but when your job depends on you having dependable transportation and you have no other options, getting a nice new reliable car with a warranty is invaluable.  Getting into debt is inevitable no matter what you buy.  No matter if you finance or pay cash for a lesser car, you are still not making smart financial decisions spending money on a depreciating asset.  Buuuuuut, if said asset is costing you your income due to its instability, then we have a real problem. 

[Horseshoez]

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@Anonymous wrote:

Thanks for the reply, I appreciate it.  People always seem to give that same advice though about getting a cheap beater or fixing the beater if you can afford a down payment on a new car.  But where this bites you is when you have now spent all the savings you were able to scrape together for said beater, or fixing owned beater, and then it dies again leaving you both broke and car-less.  Its too easy to say just wait, but when your job depends on you having dependable transportation and you have no other options, getting a nice new reliable car with a warranty is invaluable.  Getting into debt is inevitable no matter what you buy.  No matter if you finance or pay cash for a lesser car, you are still not making smart financial decisions spending money on a depreciating asset.  Buuuuuut, if said asset is costing you your income due to its instability, then we have a real problem. 

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I completely understand all of the arguments, as do most bankruptcy attorneys, who, by the way, typically recommend folks applying for a Chapter 13 go out and buy a new(er) car before they file.  My attorney strongly recommended I go out and buy something newer before I filed, however, if she explained how the process worked regarding the secured auto loan, I don't remember it.  Regardless, I felt it was unethical and unnecessary to buy new(er) when I had a perfectly serviceable 14 year old Honda Accord going into my bankruptcy; I opted to ignore her advice, and doing so turned out to be a very bad move.

Had I taken her up on her advice and gone out and bought some very basic transportation, say a new 2015 Toyota Corolla and financed it for 5 years, the loan would have been considered a priority given it was secured, and would have been paid in full by my Trustee during my bankruptcy; better still, I would have come out of my Chapter 13 with a saleable asset worth a heck of a lot more than the 2006 Acura TL I purchased in the middle of my bankruptcy and still have.

Since you are now in the same boat as I was a couple of years ago, your options are limited:

• You can opt to either "rock the boat" and petition your Trustee to modify your plan to allow you to buy a new(er) car and potentially change your plan to the point where it becomes more of a burden on your monthly finances, or
• You can opt to dive into your savings and buy an older car for cash and leave the Trustee out of it, thus preserving your current plan, or
• You can opt to dive into your savings and fix your current car for cash, also leaving the Trustee out of it.

As you can see, there are benefits and drawbacks to each, and you'll need to choose one.  As for buying a new(er) used car, not all are created equal, some, say an older Toyota Corolla or Camry or older Honda Civic or Accord, have pretty strong reliability records; just because a car is older does not in any way mean it will be unreliable.  In your shoes, I'd strongly recommend you either fix your current car or buy a used car.

[jmw1]

The bottom line is buying a new car is not an option. You need to get over it and move on. Perhaps you will learn buying new is not necessary even after the 13. Buying a used Corolla/Civic or Accord/Camry is the absolute best option. Buying a used Mercedes, MiniCooper or Jeep is a very bad idea.

Even with trustee approval, they won't give you $30k+ for a new car at the expense of your poor and helpless unsecured creditors who have almost no way to oppose your repayment plan. The trustee represents the creditors and giving you a new car would break the fidicuary duty of the trustee to the give them every last spare dime you have. 

[sccredit]

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@jmw1 wrote:

at the expense of your poor and helpless unsecured creditors 

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"Poor and helpless" is a little (okay, A LOT) dramatic. The vast majority of unsecured creditors are netiher poor nor helpless. They are, in fact, in a business that comes with losses.   

[Anonymous]

None of what you said is true at all.  People buy new cars all the time within their plans.  This is not abnormal.  Sure if I was trying to get a tesla or something of the like, then yeah they would probably say no.  But the way it works for our district is that you just ask for a dollar amount based on what you can afford.  You dont even have to have a car picked out yet.  Thats what happened as well with our house.  We were given a total amount and payment we couldn't go over.

As for new, there are many economical and affordable new cars and many ways to purchase them as to not break the bank vs putting out a large sum of money to gain an assent that would normally be seized in a BK and liquidated to pay back those poor defenseless creditors so their families can eat...lol