Fraud?

[bal_ny]

I am not reaffirming my current auto loan when I file Ch. 7. The payments are too high, I'm upside down by 10K and the car has mechanical issues that will be expensive to fix. The car is financed through my CU, as is an unsecured personal loan.

Plan A was to buy a beater for whatever cash I could scrape together between now and repo. The problem is that I'm not finding anything around here for under 3K and between payments to my lawyer and my son's summer care program payment being due in a month, there's no way I can put that kind of money together. I'm also getting nervous that my time with my current car is limited... the car payment only went a day past due yesterday, but I'm starting to get letters from the CU about my unsecured loan being VERY past due. My fear is that they'll repo the car sooner rather than later because of the other loan, especially now that the car is also late.

This brings me to Plan B: finance an inexpensive, reliable car (under 10K) that is easy to have repaired when something goes wrong and that can carry me for the next several years. This loan I'll reaffirm in the BK. My terms will be crap, my interest rate high, but I'm not sure what other options I have. I need a car to get back and forth to work and continuing to pay $500/mo. for a Jag that's slowly dying AND difficult to get repaired seems foolish.

I was told that this was a viable plan, but after reading some threads about what constitutes fraud, I'm unsure. *Is* what I plan to do allowed or am I going to get in trouble?

[FreshLikeADaisy]

What you are planning is very sound, and a good strategy.

Here's what makes it legit: you haven't filed yet (in other words, you are not taking on debt while IN a Ch7) AND you intend to reaffirm.

Fraud is only an issue when you are not reaffirming; iow, you are trying to have a debt discharged which you obtained because you had no intention of paying it. Any reaffirmed debt doesn't constitute fraud (unless there's something else strange going on) because you are not trying to have it discharged and do, in fact, intend to pay it on time.

Does that help? I wish you well with your Ch7!

[bal_ny]

Thank you, yes it does. Now I just have to worry about being approved for a car loan w/o too much money down.

In July I was able to help someone get a truck loan by cosigning for them. Now getting financing for myself is next to impossible. Sad how quickly the ship goes down once it starts sinking, isn't it?

[sharksfan]

Thank you, yes it does. Now I just have to worry about being approved for a car loan w/o too much money down.

In July I was able to help someone get a truck loan by cosigning for them. Now getting financing for myself is next to impossible. Sad how quickly the ship goes down once it starts sinking, isn't it?

This is a whole 'nother can of worms. Hopefully this particular creditor doesn't attempt to go after the other person for a balloon payment... As such the person you cosigned for will be notfied of your BK.

As far as what you are planning (purchase before BK, then reaffirm the loan) is exactly what my DW and I are doing... with 2 cars no less.

[bal_ny]

This is a whole 'nother can of worms. Hopefully this particular creditor doesn't attempt to go after the other person for a balloon payment...

Can they do that?

It's through Chrysler Financial... my boyfriend needed a cosigner and at the time I was more than able to do that for him. He's never been late. If they suddenly demanded full payment, we'd be screwed.

[CindyLou]

Can they do that?

It's through Chrysler Financial... my boyfriend needed a cosigner and at the time I was more than able to do that for him. He's never been late. If they suddenly demanded full payment, we'd be screwed.

He should read his loan contract and see if mentions anything regarding the co-signer filing bk.

He should keep his payments completely up to date. Not a day late....not even close to a day late.

You will have to list this creditor in your BK and you will be discharged of the debt.

You might want to try capital one blank check asap before your credit takes anymore hits and see if you qualify. They are easy to use and do not required a downpayment. There is just a mileage ceiling on what you purchase. But you can use the check for new or used. You could also try lending tree and see what you come up with. I would definitely try to apply for financing via these routes before you go in as you will need something for bargaining power to keep from getting screwed.

Good luck and keep us posted.

[bal_ny]

He's digging out his contract now.

What if I reaffirm that loan? Since he's keeping the truck and we are going to continue paying it, wouldn't that eliminate the problem (if there is one, I still have to read the contract).

[HHM]

Yeah, it can be messy when the co-signer files for BK. It really depends on the lender and the terms of the contract.

Sometimes they require the borrower to get a new cosigner, sometimes they require the borrower to re-apply to see if he qualifies for lending w/o a cosigner. And, sometimes, nothing happens.

[bal_ny]

Argh.

The contract does state that a bankruptcy petition puts us in default. Thank goodness for this forum or I wouldn't have known to check!

He's going to try refinancing it on his own. If that doesn't pan out, I'll try reaffirming and see what Chrysler says.

[HHM]

Hold on, nearly all contracts say that, but most courts hold that such a clause cannot be enforced.

Generally, since the car was bought less than a year ago, refinancing will not make financial sense. My suggestion, do nothing, you file BK, and see what happens. After all, the borrower is still the primary party liable for the car and that person is NOT filing BK.

If the lender starts getting squirrely after you file BK, then the borrower can look for options.

[bal_ny]

Unfortunately the borrower is in full freakout mode over it right now When he's panicky, "wait and see" won't compute.

Thank again for your help.