short sale on a car

[indeep59]

Hi all,
Find myself in the unfortunate boat of bk as it seems I'll have to file here before too long. Lots of cc debt, car loan etc. long story.

Anyway, I have an 07 Mazda with 42k on it, and a loan of 6years (3 more left) and 18k on the loan with a 10800 value (according to my bank). Payments are $500, financed at 7% way back when things were good. Was going to let it go when I file but not sure if it's the right thing to do as far as getting another one later on.

Payments are high for such a car and I'd like to get a used car at around 300 p/mth or so. So much negative equity I hate to keep paying on it, but don't want to not be able to get another later.

If I let it go the bank will accept a short sale, pending their approval of course. I can sell it outright,private or a dealer, and they will bill me monthly on the deficiency, or settle for 40% lump sum of the negative equity.

Could that "loan" get discharged later through bk?
Would that look better than a repo on my credit? Though obviously credit is trashed anyway. Would that be a red flag in bk?

Wish I could do a short refi instead though, lower the balance and still keep the car at a more reasonable payment.

[LimpDisc]

What chapter of BK will you be filing?

With Chapter 7 you might be able to redeem the car at actual value.

With Chapter 13 you could cram down the loan to actual value.

[indeep59]

What chapter of BK will you be filing?

With Chapter 7 you might be able to redeem the car at actual value.

With Chapter 13 you could cram down the loan to actual value.

I qualify for a Ch 7.
How could I redeem the car? Don't understand what you mean.

[justbroke]

I qualify for a Ch 7.
How could I redeem the car? Don't understand what you mean.

You could get a Redemption loan (from a place like 722 Redemption/US Bank) and pay only the current market value for the car. Beware that the Redemption loans usually have high interest rates.

[indeep59]

You could get a Redemption loan (from a place like 722 Redemption/US Bank) and pay only the current market value for the car. Beware that the Redemption loans usually have high interest rates.

After doing some quick googling(?) on this, I don't think this is the route I want to take. Seems like too many pitfalls and shady practices.
Perhaps I can get my bank to reduce the amount owed or something, or just forget it and let them take it.

[LimpDisc]

After doing some quick googling(?) on this, I don't think this is the route I want to take. Seems like too many pitfalls and shady practices.
Perhaps I can get my bank to reduce the amount owed or something, or just forget it and let them take it.

We thought about redeeming our car until we found out the interest rate might be 24% or more. Just put it out there for you to consider.

[HHM]

Just because it is a higher interest rate does not necessarily make a redemption loan a bad deal. That is not to say that redemption always makes sense, but you have to way the amount you save with principal reduction and the length of the loan.

For example
Balanced Owed $20,000
Current interest 8%
Remaining months 48
Payment $488 per month
If you continued to pay this note to term, you would pay $3,436 in interest. Total pay off $23,436

Redemption
Current Market Value of that Vehicle: $12,000 (not unrealistic in a redemption scenario)
Interest Rate 24%
New Term 36 months
Payment $471 per month
Interest paid over term $4,949, Total Paid $16,949

TOTAL SAVINGS WITH REDEMPTION
$6,487
Pay it off 12 months sooner
AND, redemption loans are tracked on your credit report (ride thrus are not).

Even if you kept the same term, 48 months, in the redemption
Your payment would be $391; you would still SAVE $4,657 vs staying with the original note.

Unless the car is only marginally upside down, it is difficult NOT to come out ahead in a redemption scenario.

[HHM]

After doing some quick googling(?) on this, I don't think this is the route I want to take. Seems like too many pitfalls and shady practices.
Perhaps I can get my bank to reduce the amount owed or something, or just forget it and let them take it.

Car lenders do not deal. They simply don't.

[indeep59]

Car lenders do not deal. They simply don't.

They kind of do. Citizens is the lender and THEY offered me the short sale scenario I mentioned in my original post.
Perhaps if I pressed the issue and mentioned a Ch 7 bk, they might bite on a refi?

[DebtEnder]

Wow Citizens bank would not even talk to my attorney in my BK. Carmax however offered me a great payoff deal on another car I had. About 40% of what I owed.