I filed for Chapter 13, and my husband didn’t. We have a car together, and he’s the co-signer on the loan. He wants to trade in the car to get a new one, but the banks won’t approve him unless he has a trade-in. He’d be upside down on the current car loan but plans to roll the balance into the new one. I’m currently in the process of converting my Chapter 13 to a Chapter 7. Is it possible for him to trade in the car while I’m going through this process? What should we consider before doing this?
Yes, he can trade in the car and roll the old loan into a new one, but it’s worth noting that this usually leads to a higher interest rate. He’d also owe more than the new car is worth, so it might not be the best idea unless he gets a much better deal on the new loan.
@Swift
Agreed. Rolling the old balance into a new loan might make sense, but only if he’s getting a lower interest rate or better terms on the new car loan.
If you’re converting to Chapter 7, you’ll need the trustee to sign off on an abandonment of the car before he can trade it in. Your attorney should be able to handle that for you.
Dane said:
If you’re converting to Chapter 7, you’ll need the trustee to sign off on an abandonment of the car before he can trade it in. Your attorney should be able to handle that for you.
This is important. Make sure the abandonment gets handled properly so there are no issues with the trade-in.
Rolling an upside-down loan into a new one can be risky. He might end up paying more in the long run. Has he considered keeping the car until your Chapter 7 is finalized?
Sawyer said:
Rolling an upside-down loan into a new one can be risky. He might end up paying more in the long run. Has he considered keeping the car until your Chapter 7 is finalized?
That’s a good point. Waiting might be the safer option, especially if the new loan terms aren’t great.
It’s not uncommon for people in similar situations to trade in their car, but you both should weigh the pros and cons carefully. If his credit is good, he might be able to negotiate better terms on the new loan.
@Parker
True. If he can negotiate a lower interest rate, it might make the trade-in worth it despite the upside-down loan.
Talk to your bankruptcy attorney about the process. They’ll know how to get the trustee’s approval for the trade-in and can help ensure it doesn’t complicate your case.
Addison said:
Talk to your bankruptcy attorney about the process. They’ll know how to get the trustee’s approval for the trade-in and can help ensure it doesn’t complicate your case.
Absolutely. Your attorney can guide you through this and make sure everything is done correctly to avoid issues.