In the state of Washington, your Chapter 13 Plan Payment may be largely dictated by how you fare on the Means Test. In simplest form, the completion of the Means Test calculation determines how much you can afford to pay back to your unsecured creditors. This number is derived by taking a six month total of your gross income and then subtracting a series of both real and IRS approved deductions. One of the major IRS approved deductions is the “Car Ownership Allowance.”
The problem is you don’t get the Car Ownership Allowance deduction without a car payment. So if we take two bankruptcy filers and one has a car payment and the other doesn’t, they might each ultimately have the same payment for the same period of time, but one of them is going to pay off a car during that time period and the other one is going to pay more money to her credit cards.
This is not to say that you should immediately head out to the car lot to buy a car prior to filing. You should always consult with your attorney before making this purchase because there are additional factors that determine whether purchasing a car will have any significance on the amount that you will have to pay back in your Chapter 13.
At the same time, if you are driving a beater now and you see yourself needing a car within the next two years or so, buying the car prior to filing is probably going to be a much smoother and cheaper process than waiting until after the case has been filed.
Again, the key is checking in with your attorney prior to heading out to the car lot. Please feel free to give me a call anytime at either 206-674-4559 or 503-860-6868 if you have any questions at all, thanks.