Bankruptcy & Keeping Car

[Fishtine]

I heard that there is a way to wipe out your auto loan but still keep the car. Is this true and if so how is this possible?

[ThreadsSnapping]

That's the first I've heard of that. I think you are confusing some things here. First is your liability for the loan and second is keeping the car. You liability for the loan can be wiped out in a bk if you don't reaffirm your loan. But if you don't reaffirm and don't keep making the payments the bank is going to repo the car to offset their losses. So in this case, the loan is technically wiped out but continued payments are required to keep the car.

You can't wipe out your auto loan and keep the car. Sorry.

TS

[Fishtine]

Ok, thanks for the reply! I thought it sounded fishy. But I wonder if the bank would be willing to work out a deal or something to that nature. I am filing next year Ch 7 (my attorney advised me it would be better to wait) and my fiance & I have 2 vehicles (both in our names) and one is a truck which we owe $22k but it is only worth 9k due to the depreciation on trucks with fuel the way it is. IS there anything you can think of that we can do or are we just stuck with it?

[lrprn]

...my fiance & I have 2 vehicles (both in our names) and one is a truck which we owe $22k but it is only worth 9k due to the depreciation on trucks with fuel the way it is. IS there anything you can think of that we can do or are we just stuck with it?

What is possible depends on when you bought each of the vehicles.

If one or both were purchased more than 910 days before you file, then the amount you owe can be "crammed down" to the market value of the vehicle.

If you bought one or both cars more recently than 910 days before you file, then you are stuck owing what you owe on each when you file.

To file Ch 7 and keep the cars, you MUST be current on the payments when you file.

If you do want to keep both cars, then seriously consider NOT signing a reaffirmation agreement for either car after filing. At least that way if your finances go badly any time after your case closes, you won't owe the balance of the loan. But you absolutely MUST stay current on both loans or the lender can start repossession efforts, even if you are just a few days late.

[Fishtine]

Wow, I had no idea about the 910 day rule. So it will reduce to market value? Is there a special form for that or criteria?

[AngelinaCat]

You could try to sell the truck--yeah, right with the gas prices. Or, you can voluntarily turn the truck in. The dealer/creditor will sell it at auction, and then sue you for the difference between what they make and what you owe. It takes a little while for the court processes to work. In our experience, it was about 6 months between voluntarily surrendering and being sued to where we had to appear in court. By the time they start suing you for the difference, you may be in a position to file your BK.

Assuming that you want to get rid of the truck in the first place. In our case, DH had co-signed for an acquaintance, because at the time our credit rating was golden, and the friend’s was zilch. Friend started defaulting on the payments, and we took the hit for a vehicle we never owned or wanted.

Good luck!

[lrprn]

Wow, I had no idea about the 910 day rule. So it will reduce to market value? Is there a special form for that or criteria?

If you are filing Ch 13, look back 910 days before your intended filing date. If a car was purchased before that date, you file with the "crammed down" market value listed on your forms. You can learn what your local court uses as the source for market value along with answers to lots of other questions during your 3-4 free or low cost free initial consultations with bk lawyers in your area.

[ThreadsSnapping]

What is possible depends on when you bought each of the vehicles.

If one or both were purchased more than 910 days before you file, then the amount you owe can be "crammed down" to the market value of the vehicle.

I thought you could only cram down the value in a Ch. 13? He wants to do a Ch. 7.

TS

[keepmine]

I thought you could only cram down the value in a Ch. 13? He wants to do a Ch. 7.

TS

THat's correct. In a Chapter 7, he will need to pursue a 722 redemtion.

www.722redemtion.com can answer some of the questions.

[ThreadsSnapping]

http://www.722redemption.com

That's the correct link. You forgot the "p".

TS

[lrprn]

I thought you could only cram down the value in a Ch. 13? He wants to do a Ch. 7.

Yipes! Thanks for catching that, TS. For some reason I thought we were in the Ch 13 forum.

Let me start over, Fishtine.

In CHAPTER 7, one of the options you have besides reaffirmation if you want to keep your car after filing is redemption.

Redemption allows you to cram down the value of your car to market value but you must pay the balance left on your loan after the cram down in a lump sum to the trustee when you file. Since this is unlikely - most people are broke when they file - it's rarely used. But it is possible to use it if you have a family member willing to pay off the loan difference as a 'gift', use the 722 redemption option, or something similar.

Sorry for the misleading information earlier about the 910 day cramdown. That's for Ch 13 filers only.

[ThreadsSnapping]

Ok, thanks for the reply! I thought it sounded fishy. But I wonder if the bank would be willing to work out a deal or something to that nature. I am filing next year Ch 7 (my attorney advised me it would be better to wait) and my fiance & I have 2 vehicles (both in our names) and one is a truck which we owe $22k but it is only worth 9k due to the depreciation on trucks with fuel the way it is. IS there anything you can think of that we can do or are we just stuck with it?

If you are that upside down on it, keep up the payments until you get a replacement and give up the truck. Before your any payments on anything and your credit tanks, go out and get yourself a good, used car. Just make sure you arrange financing with a different lender than your current one before you go car shopping. The dealer can try and get you better financing if you wnat but at least you know you have something before you go shopping. It also puts you in a better position to negotiate as you can walk away and go somewhere else if you don't like the price/deal.

Only thing that might prevent you from doing this is if you have both loans with the same lender. Then you may have to give up both cars.

TS

[soleprop]

to the OP - we have had some members on this forum who in a CH7 have had the auto loan company (in their case, Wells Fargo) approach them with a reduced principal and reduced interest rate reaffirmation agreement. i can't remember who it was offhand, but maybe they'll show up in your thread.