Question: I appreciated our discussion earlier today about purchasing a new car that would go on my expense- to-income ratio chart. My credit score, as I explained, is horrendous so I am looking at loans, interest rates/etc. You guys said I should check in with you and look at numbers to try to make this work.
Anyhow with all of that being said, what would be a car payment I should look at to help with my payback for chapter 13? Does that make sense? Any advice you can offer would be helpful.
B.E. in Alpharetta, GA
Answer: It was great speaking with, and thanks once again for the gift! As we explained, as you do have an older vehicle and it will be more difficult to obtain an auto loan while your case is open, buying a vehicle and waiting the required few months to file may be a good option to consider.
Any large purchases, like a vehicle, on the eve of a bankruptcy filing are closely scrutinized by the bankruptcy court and bankruptcy trustee. We want to be sure that the purchase you make does not raise any flags. A monthly payment less than $300 is usually a good rule of thumb.
That being said, you are purchasing a vehicle during the best time of the year to do so! My father-in-law has purchased many cars in the second half of December and touts it as the best time to buy since many dealers and sales people are scrambling to make their numbers by the end of the year.
Try to look around for financing before you go to the dealer. Make sure that it is not with a bank where you already have an open account and check around at the credit unions too. I have seen clients offered a wide range of interest rates with similar credit scores, so be sure to check around and compare what is out there. Beware of any "buy-here/pay-here" dealers since they will tack on the fees and the rate they offer will most likely be much higher than what you could find elsewhere.
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