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Filing Chapter 13 at Young Age


D2204
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My niece has a huge payment that she can no longer afford. The car in question is already involved in a Chapter 13 bankruptcy so the co-signer is not responsible for payments.

Can my niece file Chapter 13 and get reduced payments on the car? The loan is $28000 and she thinks there is about $10,000 negative on car.

Or, is it better to let the car be repossessed and pay balance owed to the finance company? That way she will still be able to keep her two credit cards that she just established. She is a 20 year old college student Her credit cards are already maxed out.

I hate to see her mess up her credit, but what other options does she have?

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I hate to see her mess up her credit, but what other options does she have?
Her credit is already messed up if she's maxed them out and she's just established the accounts ! That is a HUGE red flag to creditors. A repo will be even worse. What year/make/model is the car ? Chances are she's negative by a LOT more than that.

If she gives the car back, she will be liable for the deficiency balance PLUS all the fees involved in storing and selling it. Chances are the pay back would be almost as high as her current car payment. If filing bankruptcy, it might be better for her to file CH 7 and surrender the vehicle, and she walks away free and clear of it entirely. Then she can go buy a used car that she CAN afford and move on.

Does she work ? Is she a student ? Can she get a 2nd job ??

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If she has no assets.

Ch.7 is the way.

Unless she makes $50,000+ per year while going to school a Ch. 13 re-payment plan will crush her. A Ch. 13 might force her out of school.

What is a college student doing with a $28,000 car loan?

I hope she was not borrowing money for school on top of it. Student loans usually survive either form of bankruptcy!

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The car is a Honda Accord 2007 EXL. A local credit union told her they could refinance with $4500 that would leave her with a $25000 loan.

She has enrolled back in school. She works full time. I had suggested that she get a second job but she cannot since she has reenrolled in school. She also lives at home with parents.

She had a $15,000 car originally but had complaints about it. She would have been MUCH better off with the car. There are no student loans involved because HOPE scholarship was paying for school.

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I'm totally going to throw my two cents in here, since I believe that this is a topic that I've actually experienced myself...

As a youngster on the forums who is in her 20's (albeit late-twenties, very soon to be 30) and who filed for CH7 BK in her 20's, I'd like to point out a few obvious things which I'm sure you already know...But maybe your niece does not realize. ;)

  1. Your niece needs to cut up her credit cards or put them in a sock drawer and work on paying those balances down to zero. At this point, based upon the little information that you've posted, she seems to be in absolutely no position to have the responsibility of credit cards.
  2. With no student loans, living at home with the parents, working full-time and going to school, there is no reason why your niece's full-time income can't go to pay her car payment. I'm not sure what her car payment is (APR, etc.), but without major living expenses such as rent I don't quite understand why she's unable to afford her car payment...Unless she has other major expenses in her life which are taking up her entire paycheck.

The above two points being mentioned, I will say this: If I could've avoided filing for a CH7 BK, I would have without question. I was incredibly ignorant when it came to the topic of credit and responsible usage and could've very easily prevented myself from being in the situation that I ended up in. An adult in your niece's life should sit down with her, go over her bills and compare them to her income. Even working full-time at a minimum wage job, she should be able to pay her car payment. If that means cutting down on her other spending habits then so be it.

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Her car payment is $615 and 15% rate. Car insurance $170 month plus the two credit card bills, auto maintenance, recreation, and to top it off just added a cell phone bill. Income $18,000 - 19000/year. She is also planning to get braces believe it or NOT i warned her that she already SERIOUSLY above her debt income ratio.

What would happen if she didn't pay the full payment since the car is already in chapter 13 bankruptcy? Would they repo it for instance if she paid $350/mo on the car?

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If they don't get payment in full, every month, you can figure they're going to repossess the vehicle; unless I'm missing something. The signer is the principle person responsible for the payments. If they can't make them, they go after the co-signer. That does not mean there is a 50/50 split between signer and co-signer. It doesn't work that way. If the co-signer is no longer in picture, then the signer is still responsible.

I agree with Lovebug, I have been there too, although we got there by somewhat different paths. The credit cards need to go. even though their maxed out, cut them up. she will go back to them once there is a little balance on them.

I think she is going to figure out real fast, that there won't be much recreation. Unless it is a medical emergency, I would wait on the braces, and like lovebug said, sit her down and talk with her. I'm not judging, but speaking from experience.

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Speaking from experience as well, I agree with everything said

I understand she is only 20, but she obviously needs to be taught some responsibility- I wish someone had forced me to be responsible.

Would there be a problem with her postponing her college for a couple of semesters??? She lives at home after all and she's so young. Why not encourage her to get a second job for about a year?? and that way she'll really understand more of what she has done and what it takes for HER to fix HER own mistakes.

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If filing bankruptcy, it might be better for her to file CH 7 and surrender the vehicle, and she walks away free and clear of it entirely. Then she can go buy a used car that she CAN afford and move on.

If she files CH 7, then she can't keep the credit cards. Is that right? She also might have trouble buying a used car because her credit only got established in June 2007. Maybe she can buy a car at one of the "Buy Here Pay Here" Car Dealerships?

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If she files CH 7, then she can't keep the credit cards.

And that would be a problem?!?!?!

Honestly, I would let her figure this out on her own. Let her finally deal with some responsibility, because it seems like she doesn't really have any.

I would suggest taking time off from school, working two jobs if necessary, and putting every cent to the car. Her monthly car expenses pretty much equal my first semester of tuition when I was in college (I started at a community college since I was paying my own way, then transferred to Penn State).

There's absolutely no excuse for a 20 year old student, with a $28k car loan, with TWO maxed out credit cards, to be looking into bankruptcy. And what's that going to teach her? Buy lots of expensive things, and when you can't keep up anymore, poof, everything is taken care of? There's just no reason for her to be in this position. It's not the result of a loss of a (career) job, not the result of an illness, a divorce, etc. It's just the result of irresponsibility.

What about selling the car, putting the proceeds towards the outstanding loan, and paying the remainder in installment payments? I think keeping the car, and especially keeping her credit cards, should be the least of the concerns here.

And she can take the bus until she can afford a new car.

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And that would be a problem?!?!?!

Honestly, I would let her figure this out on her own. Let her finally deal with some responsibility, because it seems like she doesn't really have any.

I would suggest taking time off from school, working two jobs if necessary, and putting every cent to the car.

There's absolutely no excuse for a 20 year old student, with a $28k car loan, with TWO maxed out credit cards, to be looking into bankruptcy. And what's that going to teach her?

THank you!!!

The more I read this thread the more it seems the OP is "enabling" this 20 year old's credit unstableness and irresponsibility.

Tough love is sometimes the best love. A 20 year old has more energy and more stamina to work 2 jobs. Make her get a second job and be responsible.

There ARE times when BK is warranted. THIS situation is definitely NOT one of them. It's not fair to people who really need to file BK.

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What about selling the car, putting the proceeds towards the outstanding loan, and paying the remainder in installment payments? I think keeping the car, and especially keeping her credit cards, should be the least of the concerns here.

And she can take the bus until she can afford a new car.

Honda will not release the title if the car is not paid in full. So, that won't work.

She needs to figure it out for herself. I agree. Several family members tried to advise her about taking on so much debt at a young age. She had spoke of letting car be repoed but then changed her mind because she would not have transportation and there are no city buses where she lives.

I agree with what Gypsie said, "There ARE times when BK is warranted. THIS situation is definitely NOT one of them. It's not fair to people who really need to file BK."

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Honda will not release the title if the car is not paid in full. So, that won't work.

She needs to figure it out for herself. I agree. Several family members tried to advise her about taking on so much debt at a young age. She had spoke of letting car be repoed but then changed her mind because she would not have transportation and there are no city buses where she lives.

There are WAY to many excuses being made for this young girl. Advising by family is NOT working. Step back from the situation but before you do- make this girl get a second job!

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Then let the car be repo'd. If she can't get a new car, too bad. She had no business getting the one she did.

Another option is to go to Honda, see if they will trade it in for something cheap and used on the lot. She'll be upside down on a new loan, but if she could get something for under $300/month (which is still high for a 20 year old), it's better than what she has now. Her insurance would go down too, most likely.

Out of curiosity, did she lie on the credit app? I mean, how was she even approved for something so high, with such high payments?

When I was 20 (which was 10 years ago), I took home about $600 every two weeks, and that was working full time, while going to school. My car payment was $200/month on a $5000 car, and even that was a struggle.

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There are WAY to many excuses being made for this young girl. Advising by family is NOT working. Step back from the situation but before you do- make this girl get a second job!

Yes, advising by family is definitely NOT working. That is still my recommendation for her to get a second job, too. I think that is the best way out and to save her credit at an early age. Credit is too hard to come by these days.

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She's better off protecting her credit now (as much as she can), so taking time off from school to fix this mistake will probably work in her benefit.

By the time she graduates and is looking for a job, any employer that pulls her credit report and sees a bk from when she was 20 years old is not going to be jumping to hire her.

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Then let the car be repo'd. If she can't get a new car, too bad. She had no business getting the one she did.

Another option is to go to Honda, see if they will trade it in for something cheap and used on the lot. She'll be upside down on a new loan, but if she could get something for under $300/month (which is still high for a 20 year old), it's better than what she has now. Her insurance would go down too, most likely.

Out of curiosity, did she lie on the credit app? I mean, how was she even approved for something so high, with such high payments?

When I was 20 (which was 10 years ago), I took home about $600 every two weeks, and that was working full time, while going to school. My car payment was $200/month on a $5000 car, and even that was a struggle.

She already tried trading in (without another co-signer) and her credit is too new. They told her that her credit needs to be at least 12 to 18 months old to show how she pays her bills.

My niece's name was on the top line. Her father signed as a co-signer. It was based on his income. He and his wife had to file Chapter 13 last year. But, I don't understand either how Honda could have approved it with my niece's yearly income and her being the one to make the payments.

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I'm not gonna pass judgement on your niece and if she should or shouldn't file Bk.

I filed BK at a young age...age 19. I was married with kid. I actually filed 2 BK's.....one 13 then had to convert to a 7 after the 13 was taking all our money. 7 was the best thing me and my husband ever did. Would we want to do it again? Hell no.

I would never advice a kid to drop out of school. Eventually, that kid will hopefully have a career and more sense. lol It does sound like she was a bit irressponsible but who isn't when they turn 18 and get tons of offers for credit?

Maybe you could direct your niece to this site so she can read and learn about credit. It was a lifesaver to me....maybe it would be to her also.

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Single mom here.

5 kids: 22, 20, 19, 18 and 15. I have made my share of mistakes "enabling" my kids too. It was killing me. The truth is, she will NOT learn as long as someone is out there rescuing her.

Kid 1: Got in over her head (working full-time, school full-time then sharing an apt with coworkers). She could no longer handle the stress. After sitting down and talking it out, she joined the USArmy. She is currently in Iraq, combat medic (which makes her a certified EMT for the civilian world!). When she gets home in 15 months, she will move in with me and finish her Nursing degree (RN - ASN level) She is now self supporting. She has made mistakes financially even after joining the Army...but she is paying her bills and while in Iraq, her income in non-taxable AND she gets all the extra "war" pay. She will be debt free when she comes home! :mrgreen:

Kid 2: Graduated HS with nothing in his future. Followed his sister's lead. Joined the USArmy. Issues had him discharged early, but he did finish his training and got an additional year of experience as a Blackhawk Helicopter mechanic. He found that he couldn't get a job without the A&P license. We talked it out....he will go to the local CC and take the "refresher course" and the exams. He will complete this within 1 month after starting. (At that point he can get a job paying $20 -25/hr!) Anyway, he is living at home right now. I have covered his car payment (which I told him NOT to buy when he was in the Army :roll: ) and his insurance for the past few months. He is working FT at a McD's and gives me his paycheck. ***I was only willing to do this because he will be back on his feet in a SHORT period of time!***

Kid 3: Ahhhhhhhh. Well, he is on his last leg. Tomorrow he will move from SC (fell on his face again) and live with his dad. Oh, there are a TON of conditions his dad has put on him. One being that he has to go to school while working FT and paying his share of the bills, clean up all debts he owes, etc.... I will not take this son back home. He needs to learn. His friends have all thrown him out. This is his option of last resort.

Please understand that as long as you enable them, their behavior will continue. She has not had to suffer the consequences of her actions. This is why I have taken this road with kid3. He has to suffer too learn. Otherwise, I will be rescuing him the rest of his life! NOT gonna happen! It isn't easy sometimes. When he calls and tells me the latest mess he has gotten in, I simply tell him, "I hate it for you son. What are you going to do to fix this?" This is what she needs. With Son2, I literally locked his car in the garage while I was making payments. If I am paying for it, it is MY car. Get it?

Something else to ponder....I am 45 yo and make $72,800/yr. *I* wouldn't even buy a $28K car! Geez! What WAS your ex thinking?????

BTW,

Kid4 is a senior. She is getting the Gold Medallion Scholarship here in FL. She also is a soccer player (All-conference). She is going to attend university locally to keep down expenses. Yes, I bought her a new 2008 Scion tC. (1) I work for a the company and got an employee discount (serious one!) (2) I told her that if I make the payments, it stays when she leaves. I bought it for her more for MY convenience than hers. (she runs errands for me, goes to and from soccer on her own, takes herself and her sister to school, etc!) I also took the car away from her for 2 months this past summer for speeding tickets.

Kid5....well, a few more to go on that one. We will see.

Time to get tough with her. (OPs neice)

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