To reaffirm or Not

[motomom]

Morning everyone.........

Working on our case. Not sure if 7 or 13. Attrny (interview only) said if we do 13 they will reafirm auto loan and it will be in monthly payment to trustee.
I am confused re reafirming loans. Is this a good idea or not. From what I have read reafirming is NOT a good idea. Basically, I do not understand reaffirming a loan.
Thanks so much..........

[StartingOver08]

You can reaffirm in a Ch 7 too. In a 13 you can cram down the loan if it is more than 910 days since the loan was originated.

Reaffirming is a personal choice that begins with the math - what is your car worth now? How much do you owe? Are the payments affordable? Can you renegotiate with the lender to make the payments more affordable? If the payments are not good for you and do not fit into your budget, do not reaffirm. Reaffirmation means you are signing an agreement to accept the debt on the vehicle and continue to make the payments. Think about this for a long time, because the idea of BK is to get rid of your debt. If you are reaffirming, you are keeping that debt. (The reaffirmation agreement is a signed agreement recorded by the courts showing all the terms and conditions of the loan. It has specific language that is required by the court.)

Now, if the amount you owe is less than its value and you have few payments left and the monthly payment is affordable, then it makes since to reaffirm.

Most people on this forum will tell you, don't reaffirm any debt. Take advantage of your fresh start. Its your one chance to dump the car (surrender) without a repo on your report.

If you post the details of the car loan, value etc maybe we can chime in with our viewpoints based on your specific situation.

[motomom]

Thank you so much. We do want to keep the truck. We owe approx $34000.00 and value per KBB retail $31845 personal $27895. We are not late on any payments. Our current interest is 4.99% (pretty good).
Anyway, they way he explained it in a C13 the loan would be reaffirmed and if we chose the 3yr repay plan the truck would be included in the monthly payment to trustee and paid off in 3 yrs. Does this sound correct?? Since the attorney and the trustee gets the biggest chunk of change out of our payment sounds like the car loan holder would get very little. I would think they would deny reafirm and sell the car to get more money.
Anyway, I am assuming and we know what that means!!

[justbroke]

I am confused re reafirming loans. Is this a good idea or not. From what I have read reafirming is NOT a good idea. Basically, I do not understand reaffirming a loan.

There is no reaffirmation in a Chapter 13, because the bankruptcy is in a state called "pending". In a Chapter 7, reaffirmations are common where it makes sense. Not all Districts allow the so called "ride-through", so you must find out what your strategy will be with respect to the car. Also, some lenders don't like ride-through. I know that FMC (Ford Motor Credit) and I believe Honda Credit are the worse to deal with. It's a reaffirmation or a repossession for those creditors... no ride through.

If you recently purchased the vehicle, which it sounds like, it's a so-called "910-vehicle", meaning that it was purchased within the last 910 days. Except for the interest rate, you cannot cram that loan down to what the value of the vehicle is (11 USC 506). You can change the interest based on the Till Rate. However, I think Till is probably about 4-5% anyhow, so you won't save much there.

[motomom]

WOW, now I am a little more confused. I will add this to my question list for attorney. He said (interview only) in Cptr 13 the 2nd on house and the car loan would "go away" and be included in monthly payment. In chptr 7 it would not (which is fine with us). Sounds like he is pushing C13 since they make so much more money.
Anyway, we have owned truck for 3 years.

[justbroke]

WOW, now I am a little more confused. I will add this to my question list for attorney. He said (interview only) in Cptr 13 the 2nd on house and the car loan would "go away" and be included in monthly payment. In chptr 7 it would not (which is fine with us). Sounds like he is pushing C13 since they make so much more money.

I don't understand. I assume, now, that you are lien stripping the 2nd... so it does "go away" (so to speak). However, the car loan??? I don't know what the reference to the "car loan" and going "away" is.

Anyway, we have owned truck for 3 years.

Okay, so that is good and is not a 910-vehicle, so can be crammed down.

[motomom]

[QUOTE]I don't understand. I assume, now, that you are lien stripping the 2nd... so it does "go away" (so to speak). However, the car loan??? I don't know what the reference to the "car loan" and going "away" is.[/QUOTE][/QUOTE] 

I do not know what "Lien Stripping" is. I am quoting attorney, I quess he put it in terms we would understand. We interpreted to mean we would no longer have or make payments on our 2nd home mortgage. AND the vehicle loan, thru credit union, would be included in monthly payment to trustee. I am so glad I posted this question, as it sounded too good to be true.

You have been soooooooo helpful!!

[justbroke]

I do not know what "Lien Stripping" is. I am quoting attorney, I quess he put it in terms we would understand. We interpreted to mean we would no longer have or make payments on our 2nd home mortgage. AND the vehicle loan, thru credit union, would be included in monthly payment to trustee. I am so glad I posted this question, as it sounded too good to be true.

Okay, here's my understanding.

Your attorney is going to strip your 2nd mortgage from your home. This involves filing a motion with the court with evidence that the value of the home is less than the balance on your 1st mortgage. This will basically remove the 2nd lien from your home... if you receive a discharge by making through your Chapter 13. To keep this simple, the 2nd mortgage holder will be able to file an "unsecured" claim and be paid at whatever rate the other unsecured creditors are getting (like your credit cards). This is usually much much less than the 2nd mortgage balance itself.

As for the car, I guess he's saying that you won't be paying the Credit Union (CU) anymore, as the payments will go through the Trustee. The Trustee, in turn, pays the CU based on your new Chapter 13 Plan. Your Plan will cramdown the value of your CU loan to the vehicle's actual value. Just as with the 2nd mortgage, the "extra" (the value between what you owe and what it's worth) will be an unsecured claim, and the CU "may" get some money paid at whatever rate the other unsecured creditors are getting.

I believe your attorney was just "simplifying" it for you. I was just trying to understand the "underlying" mechanics of how your Plan is being created. I didn't mean to cause any more confusion, but hope this helps.

[motomom]

Thank you so much. I totally understand now. You did not cause more confusion just more questions since this is all so new to me and I understand very little!!
Thank you so much it is very clear now. I can print this out and go over with my husband.
You are my Hero