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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2501
Experience:  Better Business Bur 15yrs bankruptcy experience. Chicago Bar
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I live in Arizona and need to file Chapter 7 bankruptcy. I

Resolved Question:

I live in Arizona and need to file Chapter 7 bankruptcy. I am recently divorced and have an S-Corp that has not done well over the past few years due to the economy.

I own one vehicle, a nice 2004 Ford truck that is in my name personally, but the expenses and payments are made by the Corp. I owe $7000 to Capital One Auto Finance and it Kelly Blue Books for $16,200 to sell privately. I am 60 days behind on my payments. Capital One is offering me a restructure that would reduce my payments and also move my past due payments to the end of the loan. However they claim that the title is not correct and that they are not shown as a the lien holder. I called a local title service and they looked it up and they confirmed there was not a lien holder listed on the title. I went to my title and confirmed the same.

Based on the above, here are my questions and scenarios in positioning myself for bankruptcy in regards XXXXX XXXXX only vehicle:

1) Will I lose my vehicle in bankruptcy?

2) If my vehicle is protected when I file, would it be best to let Capital One be named on the title as Lien Holder, or should I not send them the documents to correct the title and list their $7000 on my bankruptcy and not have any more payments on my truck when bankruptcy is complete?

After receiving the answer related to my truck, I will followup with a question about my S-Corp


Thank you.
Daryl
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 1 year ago.

Terry L. :

Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.

Terry L. :

That can be an issue without a properly recorded title. Arizona can let you exempt - Motor vehicle up to $5,000 (or $10,000 if disabled


 

Terry L. :

Now, there is some equity. The trustee could bring a motion to avoid their security interest since it has not been perfected, and can discharge that debt in the bankruptcy. They can then sell the car, pay you your exemption amount, and use the remaining proceeds to pay your unsecured creditors.


 

Terry L. :

It may be likely that the trustee would let you finance the amount that they would have gotten if they sold the vehicle, and you can give the loan proceeds to the trustee, and then start with a new loan with the new finance company.


One such company is 722 redemption.


 

Terry L. :

Even with a valid lien, and the exemption, there looks to be some equity too, even if the trustee didn't strip the lien off. You could use 722 to fund a buyout in that instance too.


 

Terry L. :

So, no, you won't lose the vehicle if you can finance or come up with the cash difference. You could let them sell it too, and just use your exemption $ as a down payment on something new too...cars are a rapidly depreciating asset, so that might be worth looking into as well.


 

Terry L. :

The trustee could avoid the lien if Capital one puts it on there right before the bankruptcy too, the preference rules are pretty strong in favor of the trustee.

Terry L. :

LEt me know if you have any other questions


Thanks


Terry

Customer:

Looks like I don't have a way to protect my vehicle that I need for my work.


Thank you for your responses.


Daryl

Terry L. :

You should get an appraisal.


 

Terry L. :

Depending on the value and your exemption, you might be able to get a better deal..maybe the trustee would want less than 7k for it, and thereby reducing your balance you owe on it


 

Customer:

If I understand you, I would have to refinance it for the appraised amount (for instance - $15,000) If I owe $7000 now, does that mean I would be paying another $8K ?


 


Should I just sell it to a partner?

Terry L. :

let me back up


 

Terry L. :

if there is no lien, your car is paid in full and the lender has an unsecured debt. the trustee can liquidate the vehicle to get to the non-exempt portion.


 

Terry L. :

You can make an offer then, to buy out the trustee's interest.

Terry L. :

You would calculate that as Fair value - costs of sale - exemption amount.


 

Terry L. :

The trustee would rather have cash, easier to distribute.


 

Terry L. :

you can get a loan on the car for that amount to pay the trustee.

Terry L. :

then start payment on that amount


 

Terry L. :

You get your exemption amount to deduct, since you can protect some of the equity.


 

Terry L. :

You can toss out a lower number too, since the trustee won't have to spend the time to sell the car.


 

Customer:

I wont be able to get a loan for awhile. Would it be better to go ahead and allow the lien?


 

Customer:

I may be able to come up with some cash within the business in the coming months though


 

Terry L. :

contact 722 redemption. They can give you some estimates.


 

Customer:

ok...will do...thx


 

Terry L. :

the trustee would be able to strip the lien since it was a preference, done before the bankruptcy


 

Terry L. :

review the figures with your bankruptcy attorney.


they can help set it up best for you.


 

Terry L. :

If you wish to protect the car, you can pay back a portion of debt in a chapter 13.


 

Customer:

I will do that...thanks for you time and information.

Terry L. :

Sure thing


feel free to request me for any other questions.


Good luck


Terry


 

Customer:

Thank you....just filled out 722 redemption


 

Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2501
Experience: Better Business Bur 15yrs bankruptcy experience. Chicago Bar
Terry L. and 4 other Bankruptcy Law Specialists are ready to help you

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