Q: Using paycheck funds to buy a vehicle before Chapter 7 bankruptcy in Missouri.
I am considering using my paycheck funds to purchase a vehicle outright for less than $5,000 before filing for Chapter 7 bankruptcy. We are filing pro se and hope to do so within the next 3 months. We own a home valued at $75,000 with a $72,500 loan and a current vehicle for which payments are up-to-date. We're uncertain if the lender will allow us to retain it. Is it possible to use our paycheck funds to buy a vehicle under these circumstances?
A: Consult a bankruptcy attorney before buying a car so he can assess your complete financial situation.
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A:
Purchasing a vehicle outright just before filing for Chapter 7 bankruptcy could raise concerns. When you file, the court looks at your recent financial transactions to ensure there hasn't been any attempt to hide assets or unfairly favor certain creditors. If you use paycheck funds to buy a car just before filing, it could be viewed as a questionable transfer, potentially putting the vehicle at risk.
The timing is also important. The bankruptcy trustee may see this as an effort to protect assets from creditors, which could lead to the vehicle being seized or even a denial of your bankruptcy case. If the purchase is considered a "fraudulent transfer," the trustee could take action to recover the vehicle for the benefit of your creditors.
As for your current vehicle, it’s possible to keep it if the lender allows you to reaffirm the debt, but it depends on the value of the car and your state's exemption laws. The lender may agree to let you keep it if the debt is reaffirmed, but it’s essential to understand how your bankruptcy case might impact that. Make sure to carefully review the details of your financial situation and how this vehicle purchase could affect your case.
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