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buying a new car before filing a BK or after


gypsydogg
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11 hours ago, PotO said:


Why?
 

A major purchase when already in fiscal distress to the point of looking at BK and then demanding a cram-down due to the BK is just as much of a red flag as a preferential payment immediately prior to the filing.  If you have the funds for the new vehicle, then you have the means to have paid something to the creditors.  Some BK courts WILL rake someone over the coals in such an instance...

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A major purchase when already in fiscal distress to the point of looking at BK and then demanding a cram-down due to the BK is just as much of a red flag as a preferential payment immediately prior to the filing.  If you have the funds for the new vehicle, then you have the means to have paid something to the creditors.  Some BK courts WILL rake someone over the coals in such an instance...

I'm still confused.

I don't see where someone "has the funds" when they buy a vehicle on credit. My understanding is that the purpose is to obtain the loan prior to filing bankruptcy to gain easier approval / lower APR.

After they file bankruptcy wouldn't they have to reaffirm the car debt in order to keep the car?


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11 hours ago, centex said:

A major purchase when already in fiscal distress to the point of looking at BK and then demanding a cram-down due to the BK is just as much of a red flag as a preferential payment immediately prior to the filing.  If you have the funds for the new vehicle, then you have the means to have paid something to the creditors.  Some BK courts WILL rake someone over the coals in such an instance...

 

Not mentioned is that every financing application I have ever seen also clearly has a question on there:

 

Have you recently filed or are you planning on filing bankruptcy in the next 30-180 days

 

Or some version of it.  To answer NO then file could be considered fraud by the BK trustee.  To answer YES means no lender will underwrite the loan.

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Not mentioned is that every financing application I have ever seen also clearly has a question on there:
 
Have you recently filed or are you planning on filing bankruptcy in the next 30-180 days
 
Or some version of it.  To answer NO then file could be considered fraud by the BK trustee.  To answer YES means no lender will underwrite the loan.

Ok, but proving fraud would be an extremely difficult task.

People make snap decisions all the time. I could think I have my finances under control again and then something happens or I just snap and say the hell with it and file bankruptcy. Fraudulent intent is really difficult to prove unless they can read minds.


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14 hours ago, PotO said:


I'm still confused.

I don't see where someone "has the funds" when they buy a vehicle on credit. My understanding is that the purpose is to obtain the loan prior to filing bankruptcy to gain easier approval / lower APR.

After they file bankruptcy wouldn't they have to reaffirm the car debt in order to keep the car?
 

If you have funds to afford the monthly note on a new car, you can afford to have been paying existing creditors. 

 

As noted, some of the affirmations required on the loan will necessarily require engaging in fraud.  Buying a new vehicle or any other big-ticket item and immediately filing BK is something many judges and trustees are going to have an issue with...

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If you have funds to afford the monthly note on a new car, you can afford to have been paying existing creditors. 
 
As noted, some of the affirmations required on the loan will necessarily require engaging in fraud.  Buying a new vehicle or any other big-ticket item and immediately filing BK is something many judges and trustees are going to have an issue with...

Ok, so just buy the car and wait 90 days.


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I agree with Centex, it would, at a minimum, be a slippery slope and red flag to a trustee/judge.  I think of it this way, if you loaned someone money and they keep telling you they don't have the money to pay you back, then they show up in a new ride, what would you think (I know I'd be pretty pissed, which is why I don't loan people money...)

 

Many places will finance right after a BK, and in fact some creditors are more willing because you can't file again.  Just be prepared for a high interest rate and probably having to put down a considerable amount.  Your best bet is to try to find something you can pay with straight cash that will be reliable until your feet are underneath you again.

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I agree with Centex, it would, at a minimum, be a slippery slope and red flag to a trustee/judge.  I think of it this way, if you loaned someone money and they keep telling you they don't have the money to pay you back, then they show up in a new ride, what would you think (I know I'd be pretty pissed, which is why I don't loan people money...)
 
Many places will finance right after a BK, and in fact some creditors are more willing because you can't file again.  Just be prepared for a high interest rate and probably having to put down a considerable amount.  Your best bet is to try to find something you can pay with straight cash that will be reliable until your feet are underneath you again.

Makes sense.

I was thinking along the lines of someone on the verge of economic collapse who had yet to start missing payments. While their credit score was decent, it seems like it made sense to get a car with a decent APR and $0 down and then later go bust.

The auto lender ends up getting all their money and the others included in bankruptcy were going to end up losing anyhow no matter what. The only "winner" is the person who files bankruptcy and gets an auto loan at a decent rate.

-----

On a somewhat related note, around 10% of my job is dealing with people in my unit with the finance skills of a mental gerbil. Over the years I figure there is probably nothing I haven't seen ... until now.

Recently there is an individual in my unit who decided out of the blue to just cash out and then file bankruptcy. To me it smells nefarious, but when I got SJA (i.e. JAG) involved, they seem to think the guy pulled off the perfect crime.

I'd like to start a thread about this, but I think this might be something that can be misconstrued and probably not good to discuss / analyze here. What do you think?


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