To reaffirm or not reaffirm on car?

[PaKettle]

I bought a 2007 Honda Civic last January. I am paying $289/month on it and have never missed a payment, I kept paying it after stopping payment on all my other bills because I intend to keep it. We need a good car in Los Angeles, and I looked at used cars and it made more sense to buy a new one than a used one, considering the outrageous prices of used cars here. Also, I paid for the extended warranty so I should have no unexpected repairs for the next 5 years, which is a good thing.

So, my attorney says that if I keep paying the car, I should not have to reaffirm it. He says that in his experience over the past few years no one has ever reported to him that the Finance Co. reposessed their car after bankruptcy, as long as they made their payments on time. So he is advising against "reaffirming".

He says that if I reaffirm it means that if I walked away from the car I would still owe on it, whereas if I do not reaffirm, I could walk away from it, no problem, no debt owed.

However, on 2nd thought, that makes no sense to me. Why would I walk away from a car that I have some equity in already?

The car is listed at Kelly Blue book (kbb.com) as worth $17,475 in excellent condition (which it is; I've only driven it 3200 miles), and worth $16,475 in good condition.

The payoff amount on the car is $14,647. So I have almost $3k in equity in it already.

So, my question is, why wouldn't it be best to reaffirm it? Seems to me that by reaffirming it, I eliminate any chance of their repossessing it, and there is no way I am going to walk away from the car. If I discovered I could not make the payments for any reason, I would sell it and buy a cheaper car, using the equity towards the cheaper used car.

So, my question is:
Why is the attorney so keen on my not reaffirming?

If I do reaffirm, is there some disadvantage I don't know about? Can they raise the interest rate? (I got a decent rate, around 7-8%.)

Would it slow up my bankruptcy process if I reaffirm? Or would I still be (hopefully!) discharged fully after 60 days following my 341? What does reaffirming entail in terms of bureacracy, added costs, added meetings, etc., if any?

Please advise. I feel like my attorney is kind of railroading me into not reaffirming but I'm not sure that's true, it just feels that way because every time I've asked him about it he gives me the speech about how no one ever has repossessed a (non-reaffirmed) car in his experience, if the payments are made on time.

As usual, thanks for your feedback. I'd love to hear if anyone knows of anyone's car getting repossessed after bankruptcy even if they made payments on time.

Oh, and one more thing that concerns me, and I found this very odd:

I went to my Honda Finance page on the net to see how much I owed on the car, and the My Finance link (from my owner link page) has disappeared! It's as if I had never signed up for it. I have been paying via that link for the past 9 months or so, and now the link has disappeared from the page, and it is like it was before I signed up. I wonder if they want me to sign up again, as if that is some kind of "reaffirmation" on the debt, itself...? Anyone had this happen to them? (This is after I filed almost 2 weeks ago.)

[texas99]

I KNOW what you are saying but it seems as though your attorney is just trying to keep your options open for any future debt problems you may have

if you are 100% sure your gonna keep it, reaffirm that bad boy

[325Falcon]

I say dont reafirm. The bank does not want your car at allm so if you stay current they will not take it again the bank wants the cash not the car!

An dont forget, what the book say the car is worth is one thing and what you will be able to sell it for is another.

[t&msmom]

My atty told me the same thing...not to reaffirm. The only neg she told me was that by continuing to pay on it, and not reaffirming, it won't help your credit score, because you aren't financially responsible to make that payment. I'm not planning on reaffirming mine. In our situation, it is kind of like an additional insurance. I know that sounds weird, but if the transmission were to blow in year 4, and it'd be cheaper to buy an older used car than to fix it, you don't have to worry about getting sued.

[oldbaddebts]

1) Even if you reaffirm, your payments most likely won't be posted to your credit. It will likely show "IIB" for Included in Bankruptcy, and they will stop reporting.

2) You have some equity in it, but it looks like you have several years left on this. Seems how you are going through the hassles to get a "fresh start", you might consider moving way down in vehicle so you can build a good savings and enjoy your fresh start without a $14k anchor holding you down.

3) While you have an open bk, most banks will not allow you to access the financials online. They do this so there is no question of them attempting to collect a debt. If you plan on keeping it, it is your responsibility to mail in the payments to them. Call and see what address they want payments sent to while you are in bk.

4) The process to reaffirm is relatively simple if you have an attorney, though he may charge you additional fees. He takes care of most of it as long as he agrees it's in your best interest. By law, he has to look at what is in your interest, not necessarily what you want. If he doesn't agree you should keep it, you may have to go to a hearing with the judge to convince him. Essentially, you are a child and the lawyer has to be convinced what you want is good for you, if he doesn't agree, you have to have the lawyers decision overridden.

It appears in the bk process the auto creates the biggest hassle in the process. It puts a lot of people, myself included in a serious catch 22.

[CindyLou]

In California whether you reaffirm or not they will not report any different. It will still say IIB.

[PaKettle]

1) Even if you reaffirm, your payments most likely won't be posted to your credit. It will likely show "IIB" for Included in Bankruptcy, and they will stop reporting.

2) You have some equity in it, but it looks like you have several years left on this. Seems how you are going through the hassles to get a "fresh start", you might consider moving way down in vehicle so you can build a good savings and enjoy your fresh start without a $14k anchor holding you down.

3) While you have an open bk, most banks will not allow you to access the financials online. They do this so there is no question of them attempting to collect a debt. If you plan on keeping it, it is your responsibility to mail in the payments to them. Call and see what address they want payments sent to while you are in bk.

4) The process to reaffirm is relatively simple if you have an attorney, though he may charge you additional fees. He takes care of most of it as long as he agrees it's in your best interest. By law, he has to look at what is in your interest, not necessarily what you want. If he doesn't agree you should keep it, you may have to go to a hearing with the judge to convince him. Essentially, you are a child and the lawyer has to be convinced what you want is good for you, if he doesn't agree, you have to have the lawyers decision overridden.

It appears in the bk process the auto creates the biggest hassle in the process. It puts a lot of people, myself included in a serious catch 22.

Thanks for the info, especially regarding the finance co. closing my account online. Will they still send me the bill, or will I have to just make the payments without even a bill?

As to moving down in vehicle, I don't see that as a good move. I'd rather pay $290/month and know I can get to and from work, than to pay, say, $150/month and face the possibility of a $1000 repair that I don't have the money to make, or just having it in the shop for several days while making that repair... Living in a city without good bus routes, and needing to get to work on time, or else, I see it as worth it to have a good reliable car, not a used car that could break down. Also, as I stated, I have an extended bumper to bumper warranty on it, too.

So basically, I guess not reaffirming seems to be the consensus, here. Are there any Advantages at all to reaffirming? If they don't report it on my credit report as an account in good standing, then ...?

But when I go to sell the car, if I don't reaffirm, I can still get my equity out of it?

One more question:
Is it in my best interest to call the car finance company and tell them that I plan to continue making payments? or should I just keep quiet and keep making payments?

Since I DO have some equity in my car, and it's in "brand new" condition (it's a low mileage 07) is there any more risk than usual that they might want to repossess it?

[manglicmot]

I live in San Diego CA and my car was financed through Ford Credit. Even though the BK laws require you to reaffirm, my lawyer did not reaffirm my car loan. I was never late on a payment and am still current to this day.

Here's the deal - even though the new laws require you to reaffirm, what are the finance companies going to do if you don't reaffirm? they don't want to go around repoing cars, they would rather just keep taking your payment. And guess what? If you do NOT reaffirm, you can legally walk away from the loan later if you have to, such as if you wreck the car.

If you have an attorney who is not forcing you to reaffirm, that means you have a good attorney - he is looking out for your best interests even though the rules require him to do otherwise.

I forgot to mention - I never talked to Ford Credit other than to get the address to mail the payment. I would not speak a word to them because they will do whatever they can to get you to reaffirm.

[PaKettle]

I live in San Diego CA and my car was financed through Ford Credit. Even though the BK laws require you to reaffirm, my lawyer did not reaffirm my car loan. I was never late on a payment and am still current to this day.

Here's the deal - even though the new laws require you to reaffirm, what are the finance companies going to do if you don't reaffirm? they don't want to go around repoing cars, they would rather just keep taking your payment. And guess what? If you do NOT reaffirm, you can legally walk away from the loan later if you have to, such as if you wreck the car.

If you have an attorney who is not forcing you to reaffirm, that means you have a good attorney - he is looking out for your best interests even though the rules require him to do otherwise.

I forgot to mention - I never talked to Ford Credit other than to get the address to mail the payment. I would not speak a word to them because they will do whatever they can to get you to reaffirm.

Thanks much for your personal experience with this!

I am leaning towards not reaffirming but still, I don't see the value in it. People speak of "walking away" from a car. I have never walked away from one, and can't imagine under what circumstances I would.

If I can't afford it, having equity in it, I'd sell it and get a cheaper one.

If I wreck it, I'd use the insurance money to get a new one.

I just do not see the real world advantage of not reaffirming it. But since everyone is advising me not to, I guess I won't.

[woohoogirl]

If you wreck a car that you haven't reaffirmed, do you keep the insurance proceeds or does that go to the lender?

[HHM]

If you wreck a car that you haven't reaffirmed, do you keep the insurance proceeds or does that go to the lender?

The insurance proceeds still go to the lender to satisfy the lien.

[PaKettle]

The insurance proceeds still go to the lender to satisfy the lien.

But I assume you would get the leftover if there was any?
i.e. if you have mostly paid it off, say, you only owe $3k, and the car is valued at $8k and is totalled, I assume you would still get the other $5k in your pocket as you are the one paying the insurance, right? Same as if you sold it, you would still get the $5k over and above what you owe, no?

In other words, even though you do not reaffirm the loan, you still get your equity out of it in the above 2 scenarios (or any other I cannot think of)?

[HHM]

But I assume you would get the leftover if there was any?
i.e. if you have mostly paid it off, say, you only owe $3k, and the car is valued at $8k and is totalled, I assume you would still get the other $5k in your pocket as you are the one paying the insurance, right? Same as if you sold it, you would still get the $5k over and above what you owe, no?

In other words, even though you do not reaffirm the loan, you still get your equity out of it in the above 2 scenarios (or any other I cannot think of)?

Correct. The bank is only entitled to what they are owed on the vehicle...thus, if the insurance settlement is greater than the amount owed on the vehicle, you, the owner, would pocket the excess.