Does Parent's Chapter 13 Expense Schedule Include His Monthly P...

Here’s a relatively simple, but common,  question I was asked by email this past week. The writer makes payments on his daughter’s car titled in his daughter’s name. The writer (the parent) wants to file Chapter 13 bankruptcy and asks whether his monthly payment for his daughter’s car can be included in his expenses so as to reduce the amount of his monthly Chapter 13 plan payment.

The answer depends upon whether the parent signed the loan. If the parent co-signed the daughter’ s car loan then the parent may include as an expense the loan payment, maybe. The Chapter 13 trustee may challenge inclusion of the secured loan for a car which the parent does not use and which is not necessary. The extra car should not be paid for, in effect, by the debtor’s unsecured creditors. If the debtor’s plan pays 100% of his creditors then the car payment on the daughter’s car should not be a problem.

If the parent did not co-sign the loan then the parent’s monthly payment is in effect a gift to the daughter. The debtor cannot  include the gift as an expense because the debtor has no legal liability of payment. Even if the debtor proposes a 100% repayment plan the Chapter 13 trustee may disallow the “expense” so that the creditors are paid back in shorter time.