Car Loans and Reaffirmation

[98daffodils]

Hi Everyone,

I just filed a CH 7 and have my 341 meeting this month. I don't own a home, but I do have a car loan. I have always been current/paid the car on time (even early some months) and I intend to keep the car and continue making payments. It is my dream car (has been since I was a little girl) and even though it is 8 years old, it has very low miles (44k). My lender is Bridgecrest, and I am concerned about reaffirmation. My lawyer has told me that reaffirmation is discouraged, especially since it is not a lender like Ford who requires it. She also indicated that the Trustee is unlikely to approve a reaffirmation. Her guidance was to just continue to pay for the car on time and keep it. However, I am nervous because I know they can technically take it without reaffirmation even when you are current. I know I will always pay it on time, but there is no guarantee they won't decide to take it. Has anyone dealt with Bridgecrest on this before?

Also, if they did take it (which my lawyer says is unlikely as long as I pay) I would be in violation of my custody arrangement because I have to drive 30 minutes each way to take my kids to school, activities, etc. It would also affect my job. I don't have any other car. I have been getting these offers in the mail for auto dealerships offering cars even before discharge... is that normal?

Thanks in advance for any advice!

[justbroke]

There is no reason to reaffirm a motor vehicle loan unless it is required by the lender (Ford FMC, and I think Honda HFC). Here, in Florida, we must reaffirm if the lender complains about it since the caselaw from our circuit has determined that we must do so; but only if the lender complains (by filing a motion).

You wrote that the car can "technically" be taken anyhow? Where did you learn that? The lender must follow non-bankruptcy law. In other words, the lender can't repossess if you're paying on-time and maintaining hazard insurance. They must go by the rules of the underlying State law with regards to the contract. Continuing to pay on time and maintain insurance would keep you in line with the contract.

Do you know how Ford (FMC) and Honda (HFC) force people to surrender, redeem, or reaffirm? They file a motion demanding (compelling) that the debtor choose one of those options. They need the bankruptcy court to do that. It's not magic that FMC can automatically repossess a car after bankruptcy. They just follow the procedure to force the debtor to chose and follow-through with the selected option (redeem, reaffirm, or surrender).

So, your attorney is, of course, correct. No reason to reaffirm. Besides, a judge probably wouldn't allow a reaffirmation in most cases. I love the judges that just say no to reaffirmation.

Go back to your attorney and have them explain under what conditions a vehicle, not reaffirmed in a bankruptcy and for which the creditor did not ask the court to compel debtor compliance, can be repossessed. You'll probably hear the words "for lack of timely payments" or "for failure to maintain adequate insurance."

[98daffodils]

justbroke - thank you so much! I will go back to my attorney to clarify. She initially told me that the judge won't reaffirm anyway even if I wanted to (unless it is Ford or a credit union, exception etc) and that if I just continue to pay and carry the insurance, I will be fine.

But I was talking to a friend of mine who lives in California and they took his car... and he was current, never once missed a payment. His insurance was also full coverage and intact at all times. When he inquired why it was taken, they said because he no longer had a contract since he chose not to reaffirm (in his case the lender asked that he reaffirm and his lawyer declined). The lender claimed that lack of reaffirmation put him in default of the contract. His lender was CarMax Auto Finance.....anyway..... it got me worried since that happened to him. I am in Virigina, though so I know the rules/law are likely different.

But if I understand you correctly you are saying that as long as the payments are made on time and the proper insurance is held, they cannot take it away (unless of course they ask the court by filing a motion for me to reaffirm and I do not) - is that right?

[justbroke]

justbroke - thank you so much! I will go back to my attorney to clarify. She initially told me that the judge won't reaffirm anyway even if I wanted to (unless it is Ford or a credit union, exception etc) and that if I just continue to pay and carry the insurance, I will be fine.

Yes. This is the exception. If you present a reaffirmation to the judge the judge will nearly always not allow the reaffirmation. The exception is just as you mentioned; credit unions, Ford, and Honda are the exceptions. As I wrote, and as you also write, you just need to continue to. pay and maintain insurance.

In your friend's case, they may be in a jurisdiction similar to Florida where you must reaffirm, redeem, or surrender. Most lenders don't care if you're paying on time (always paid on time), continue to pay on time, and maintain adequate insurance.

But if I understand you correctly you are saying that as long as the payments are made on time and the proper insurance is held, they cannot take it away (unless of course they ask the court by filing a motion for me to reaffirm and I do not) - is that right?

If you're concerned, then your best bet is to talk to your attorney and ask for the reaffirmation. Hopefully the judge denies the reaffirmation. Once you have that order denying reaffirmation, the lender will be instructed that they cannot repossess because you didn't "reaffirm, redeem, or surrender" the vehicle. They could then only repossess for failure to pay or maintain insurance. Different jurisdictions deal with this differently. In Florida we must (technically) redeem, reaffirm, or surrender. If we check "reaffirm" on the State of Intentions (SOI) and the lender never sends a reaffirmation agreement or ask for one, then we are allowed to "ride-through" because we stated intent.

Some other jurisdictions behave the same way and if you're concerned, then I suggest asking your attorney about updating the SOI and attempting a reaffirmation. But, generally, most don't need to reaffirm unless it's a credit union--because they are a special case--or one of the few lenders that require a reaffirmation. Most attorneys will put "retain and pay" on the SOI but I can't tell you if that's enough for where you live.

[98daffodils]

Thank you so much. I will definitely reach out to my attorney. I just looked at the Statement of Intention that she filed with the petition.... it is blank. It does not list the lender or which option I chose. When I mentioned this earlier she said that it was filed and it said I chose to retain and pay... but what I am pulling from PACER shows a SOI form 108 is not completed.....

[98daffodils]

Just spoke to my lawyer. She keeps saying they don't require affirmation, which I understand that.... but I am a contracts negotiator for a living. I don't like the idea of not having a contract that says you cant take my car unless I fail to pay or carry proper insurance. I asked her to file a reaffirm and when it is denied it will say "she tried and you cant take her car, etc". Wouldn't that be better than risking my kids walk outside for school one morning and there is no car? Should I just go and get another car and avoid this altogether?

[justbroke]

J I don't like the idea of not having a contract that says you cant take my car unless I fail to pay or carry proper insurance.

But you do have one. Your installment contract is what allows them to take the car if you fail to pay or carry proper insurance. A well misunderstood concept in bankruptcy is that a bankruptcy voids the contract; it does not. A bankruptcy only removes your personal.y liability for the debt.

I asked her to file a reaffirm and when it is denied it will say "she tried and you cant take her car, etc". Wouldn't that be better than risking my kids walk outside for school one morning and there is no car? Should I just go and get another car and avoid this altogether?

You could do a redemption. I don't know how much you owe or the value, but I did a redemption--buying the car from the lender for the actual value. It may be difficult to try to buy a new car now but after discharge you'll get offers with high interest rates.

[98daffodils]

I owe 24k on it and it is only worth 17k. So I wouldn't have the 17K to buy it...

[justbroke]

I owe 24k on it and it is only worth 17k. So I wouldn't have the 17K to buy it...

It's probably too late, but there is a company that specializes in redemptions called 722 Redemption. They specifically make loans to debtors to redeem vehicles, or purchase a new vehicle, in a Chapter 7. Typically, a debtor would setup a redemption and file the requisite motions as soon as they filed.