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Roger, Attorney
Category: Bankruptcy Law
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I have around $50,000-$55,000 in unsecured debt and need to

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I have around $50,000-$55,000 in unsecured debt and need to file chapter 13. The problem is that I have a lease on a truck that will end in 15 months. Can I take money from a retirement plan and pay cash for a fairly new truck and let this leased truck go back? Otherwise, I will be without a vehicle once the lease is up before I won't be able to get financing. If I buy a truck and pay for it in full can they take it from me after filing chapter 13?
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  Roger replied 8 years ago.

You're better off to keep the lease and just re-affirm the debt along with all of the other debts you're planning to repay - if you want to keep the truck.


The reason your attorney wants you to purchase a cheap vehicle is because creditors won't come after it and you won't have a car payment complicating the repayment matrix your attorney and the trustee will agree upon.



Customer: replied 8 years ago.
Our attorney says it is a waste of money to keep paying on the lease. Our lease is through Chrysler Financial and they have already told us they won't give us a loan to buy the truck once the lease is up. No one else will give us a loan, either. Nothing makes any sense, we are just in a dilema and I don't want to waste money on a junk vehicle. I don't have the money to buy another junk vehicle when it gives up and don't have money to fix up a junker. Our attorney won't give us a straight answer.
Expert:  Roger replied 8 years ago.

Your chances of getting financing are better if you pay out the lease instead of letting it go early. If you give the vehicle back, you're ceartinly not going to get financing.



Customer: replied 8 years ago.
I won't need financing if the vechicle is paid for. It is a nicer vehicle with a warranty and would last for the duration of the bankruptcy, which will probably be 5 years, plus longer than that with good care. To me this is more reasonable than buying a junnker. My husband works in security at a college that is 20 miles one way, he needs something realiable. Last winter we had a lot of snow and ice, he can't depend of something that might not start. I can't seem to make my point. I thought you could keep your assets in a Chapter 13. This would be the only asset we had, except for my car which I still owe on and our house, which has no equity. We have nothing else of value. I know this is a little confusing since I can't talk to you in person, but our attorney is older and interupts so much when we try to talk to him we just can't get a word in. I don't have a lot of money in my retirement account, just enough to buy a nice truck that we found. He advised us to just let the leased truck go back. We had intended to buy it if we hadn't got ourselves in such a financial mess. The payoff on the lease is more than if we just bought the other truck and we would have a little nicer truck than the one we have now, plus a better warranty. Like I said, I thought you could keep all of your assets in a Chapter 13. I just don't want to get into trouble for taking the money out of my retirement account, and I also have to worry about declaring it as income next year and paying the penalty since I'm not 59 1/2 yet. Sorry to be so much trouble but it's had to get an appointment with our attorney and hard to talk to him. I hate to change attorneys now, we need to get this thing going. Thank you for your time.
Expert:  Roger replied 8 years ago.

You're right that you can keep your property by filing a Chapter 13. It is a reorganization of debt into a payment plan that you can pay monthly for 3-5 years, depending on the amount of debt, income and assets you have.


My best advice is that you try to agree with your attorney on how to proceed before you do anything. It may be that you can work something out where your retirement money is not in jeopardy of being thrown into the bankruptcy estate by buying the truck. As you probably know, retirement accounts are usually safe in bankruptcies and cannot be used to pay off debt.


Also, you don't want to do anything that may put your bankruptcy in jeopardy of being dismissed. It is worth sitting down with your attorney and trying to evaluate all factors before you go out and drain your retirement account for a new vehicle.


My guess is that your attorney wants the plan to be put in place by the court before you do anything. At that point, it would probably be easier to dip into your retirement money and get a new vehicle.



Customer: replied 8 years ago.
One final reply and I will stop bugging you. Our attorney was going to allow me to take money from my retirement account to put a sizeable down payment on the truck and then allow us to finance the rest through roadloans, which would have made the payment $400 a month for 4 years. But like I said, that fell through. So what's the difference, we would have had a payment if it had gone through, this way, we won't have a payment to include. I realize that the truck we have now will be considered a repo and the money still owed on the lease will be included in the bankruptcy at a reduced amount. I just don't want to get into trouble for taking the money out of my account and don't want them to try and take the truck, after all, my husband needs something to drive. I couldn't have paid off all the debt we have, anyway, from the money in my account, there just isn't enough. I do have another larger account which is safe but I can't take money out of it. This has probably been an unusual question since most people that file bankruptcy don't have leases. When the laws were set up and changed I don't think leases were taken into consideration and the consequenses of not having something to drive once the lease was up. We will try to talk to our attorney about this matter but may have to end up changing attorneys because this is a crucial problem. Thank you again.
Expert:  Roger replied 8 years ago.
IF you're filing a Chapter 13, I don't think you'll get in trouble for taking money out of savings to buy a truck free and clear in order to turn over a lease. In fact, that's what your attorney has suggested doing. Also, the trustee is not going to take away your means of transportation. If you don't have that, it's going to be tough to meet the terms of the repayment plan.
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