My first post - some complicated questions..

[IBroke]

Hi Folks,

First of all, great to be with you! Seems I found the right place to prepare myself for my CH.7!

Now here's my problem:

7 months ago, my mother and I got a joint car-loan at one of these "buy here, pay for an eternity" dealerships. I decided to file for BK Chapter 7 and redeem the car. The balance of the loan is $7,000 and the value of the 10-year old car is less than $2,000. Here are my questions:

1. CAN I redeem the car at all because the loan is less than 910 days old or does this only apply to Chapter 13 cases?

2. Is retail- or trade-in value used to evalute the required redemption-amount? I was thinking about driving the car to a CarMax and get a trade-in appraisal from them since I read on a different site that KBB- or NADA-sources wouldn't be as current and might reflect a better market than we actually have (and so, higher values).

3. Is it true that my mother, the co-signer, will be off the hook if I redeem the car or will she still be liable for the money the creditor is short?

4. In case there is an expert on credit-reporting on this board, will there be a negative impact from this account after I have redeemed the car? So far, I never mssed a payment and it's a positive tradeline. Does FICO calculate a reedemed included in Bankruptcy different than a paid-off account? Would the remark "IIB" actually cost me some points (maybe through a hidden reporting-code) or is there only a different REMARK on the account?

5. My mother is going to file Chapter 7 as well - just a few months later. Is there anything I have to consider in regard to the auto-loan (Do I have to continue payments to avoid a late-payment on HER report until SHE files or will my filing and redemption take care of her responsibilities as well?)? I assume the car would show up on her report as paid WITHOUT a remark of BK on that account if 3. will be answered with "YES".

WOW, so many questions in my first post..

I would ask my attorney but I don't have one - too expensive for me..

Thank You very much in advance for ANY help!

[freshstartfl]

Welcome to the forum! Sounds like you've been doing a lot of homework and preparation for this. I'm not 100% positive on your questions, so I'm not going to answer them based on hunches and "I thinks". I will ask this, though -- have you looked into whether the 722redemption company will process a car that's 10 years old? Because I believe I've read there's a mileage/age limit for what they'll bother with.

[freshstartfl]

oh, clap clap! Tampa Bay, eh? Just noticed that. Lots of us on here, it seems.

[IBroke]

Welcome to the forum! Sounds like you've been doing a lot of homework and preparation for this. I'm not 100% positive on your questions, so I'm not going to answer them based on hunches and "I thinks". I will ask this, though -- have you looked into whether the 722redemption company will process a car that's 10 years old? Because I believe I've read there's a mileage/age limit for what they'll bother with.

Thanks for your input!

First, I wanted to reaffirm the car-loan but after I found out how LOW the actual value is, I decided that redemption would be the wiser decision.

"722 redemption" is the option where you obtain a loan to redeem, right? Actually, I wouldn't need any loan because the value is between $1,500 and $2,000. We could come up with that amount. I'm currently paying $300/month on that car (with almost 50% of that going to interest) so although that car is in a good condition for its age, I'd lakt to get rid of this shark-loan.

And yeah, Tamp area - my mum and I were in the Real Estate business - now go figure why I'm posting here..

[freshstartfl]

722 redemption is where you purchase it for the fair market value, yes. Reaffirm is where you continue with your current loan. Redeeming with cash would be a good option. Those redemption loans come at a steep rate, and I honestly don't think the 722 financing people will deal with an old old car or a high mileage car. I wonder, though, where you could safely keep the cash or exempt the cash until it's time to redeem? I don't think I've read of anyone on here who redeemed with cash, so that's an interesting situation. The fact that you've only had the loan for 7 months, tho, is a concern, because it can't be a newer loan. Hopefully someone who knows the ins and outs of that will respond.

As far as your Mom is concerned, if she's also filing BK, I wouldn't worry about how it'll affect her credit or whether she'd be "on the hook" in the meantime.

[IBroke]

I don't think it's an issue. Sure, you have the cash - but keep in mind that this cash goes to one of the creditors - every single penny of it. And since everybody needs a car...

Since we are not filing at the same time and due to the fact that it's a joint loan, I can point out that the money for that car comes from my mother. She's using the car for her job and needs it, so why shouldn't she make sure that she can keep the car by paying for it? If I would have to surrender it, she would be required to pay the entire loan WITHOUT having a car. This car is the only ride for the two of us and since I'm currently unemployed, I don't see how it would be responsible to obtain an additional loan for that car - I don't even know how I should qualify in the first place. Everybody needs some kind of transportation and if a 10-year old car with almost 100K miles and a value of $1,500 is too much for 2(!) people, I'd be interested to find out what a judge would think is "appropriate".

[JRScott]

Hi Folks,

First of all, great to be with you! Seems I found the right place to prepare myself for my CH.7!

Now here's my problem:

7 months ago, my mother and I got a joint car-loan at one of these "buy here, pay for an eternity" dealerships. I decided to file for BK Chapter 7 and redeem the car. The balance of the loan is $7,000 and the value of the 10-year old car is less than $2,000. Here are my questions:

1. CAN I redeem the car at all because the loan is less than 910 days old or does this only apply to Chapter 13 cases?

2. Is retail- or trade-in value used to evalute the required redemption-amount? I was thinking about driving the car to a CarMax and get a trade-in appraisal from them since I read on a different site that KBB- or NADA-sources wouldn't be as current and might reflect a better market than we actually have (and so, higher values).

3. Is it true that my mother, the co-signer, will be off the hook if I redeem the car or will she still be liable for the money the creditor is short?

4. In case there is an expert on credit-reporting on this board, will there be a negative impact from this account after I have redeemed the car? So far, I never mssed a payment and it's a positive tradeline. Does FICO calculate a reedemed included in Bankruptcy different than a paid-off account? Would the remark "IIB" actually cost me some points (maybe through a hidden reporting-code) or is there only a different REMARK on the account?

5. My mother is going to file Chapter 7 as well - just a few months later. Is there anything I have to consider in regard to the auto-loan (Do I have to continue payments to avoid a late-payment on HER report until SHE files or will my filing and redemption take care of her responsibilities as well?)? I assume the car would show up on her report as paid WITHOUT a remark of BK on that account if 3. will be answered with "YES".

WOW, so many questions in my first post..

I would ask my attorney but I don't have one - too expensive for me..

Thank You very much in advance for ANY help!

1. The options in a Chapter 7 are surrender, reaffirm or redeem. So yes if they are willing to redeem it for its current value you might could work that out.

2. In most districts you need a KBB or NADA value, check with your lawyer before getting another estimate as it might not be accepted by local trustees.

3. You need to check with your lawyer but I believe if the car is redeemed she's off the hook.

4. On your credit report it will show as IIB which means included in bankruptcy. Just like all such accounts that are IIB. (Note you have to list all debts public and private legally).

5. Depends on what happens. If you file bankruptcy and do not redeem the car then yes she would be responsible for any payments if she wanted to keep the car. At the time you file the lien will go into her name, she is not protected by your filing so they can call her as cosigner. If she does not make timely payments then yes they will note late on credit reports up until such time as she files and then it will be IIB.

[IBroke]

Thank You for your reply!

1. You said "if they are willing to redeem at its current value."
I was under the impression that it was ME to decide if I want to redeem and not the lender? If not, why does the law mention the current market value and not "a price both parties agree on"?

2. If I use KBB, which of the 3 values do I use? Trade-in?

[StartingOver08]

Only if the Trustee allows you to use trade in. My Trustee required us to use Retail.

Remembert, the Trustee is not looking for actual value , they are looking for assets. If you get a free attorney consult (even if you ultimately decide you can not afford an attorney) the attorney will tell you which value is the accepted value in your district.

[IBroke]

Only if the Trustee allows you to use trade in. My Trustee required us to use Retail.

Remembert, the Trustee is not looking for actual value , they are looking for assets. If you get a free attorney consult (even if you ultimately decide you can not afford an attorney) the attorney will tell you which value is the accepted value in your district.

Thanks! I'm going to schedule a free consultation with an attorney and clear that issue. The prior post just sounded like the CREDITOR would set the value and the decision would be with them - and that didn't make sense to me.

EDIT: Here's what I found from an Attorney from Orlando - not too far away from me..:

Bankruptcy trustees have in the past determined the value of a debtor’s car by using the average of the wholesale and retail value in the NADA car book (the yellow book). In the past few months car values have plummeted because of the credit problems in the economy and the overall recession. The NADA book has not kept pace with the decline in car values. This week I discovered that some bankruptcy trustees in our division are encouraging debtors to get trade-in appraisals from national car companies such as Carmax. The Trustees are accepting these appraisals in lieu of the NADA values.


For example, one of my clients filed a bankruptcy petition on which he valued a used car at $3,000. There was no lien on the car. The car had, therefore, $2,000 of non-exempt equity. At the creditors meeting the Trustee encouraged the debtor to get a current appraisal. The next day the debtor obtained from Carmax an appraisal of $500 for the same car. Bankruptcy debtors should get market appraisals for their cars before filling out bankruptcy petitions. Your bankruptcy attorney is not a car valuation expert, and he is unlikely to change your valuation of your vehicle. The market for used cars is almost as depressed as the real estate market. Debtors should insist that their vehicle equity is based on current market values rather than slow-changing valuations in used car price books.

[StartingOver08]

That's an excellent post! There are many that have filed in your district (Middle District of Fl) that have had their values challenged (check FloridaGuy's posts). If you have that valuation from Carmax when you fill out your schedules then you at least have third party documentation to supply if the Trustee challenges your car value!

Thanks for posting that solution!

[IBroke]

You're welcome! It's very difficult to find bulletproof information about this topic. I visited a ton of websites over the last few days.

We bought that car out of an emergency because all the cars we previously owned were to expensive and went to the repo. 7 months ago, we purchased our current car, a 2000 Mercury Sable with 88K miles from a "buy here, pay here" dealership. At that time, we were happy to get a loan at all.

The purchase price was more than $9K and I knew exactly that price was ridiculously high..

We made a down-payment of $1300 and are now paying $300/month for a total of 36 months. That gives you an idea of the astronomic interest-rate.

So up 'til now, we already paid $3,500 for that beater and if they get an additional $1,500, I honestly don't see what they have "lost"...

Of course, they would like to take it back and put a new $9K window-sticker on it and do the same thing again.

I'm unemployed, have no assets at all and will share that car with my mother. If trustees in my district used the lower trade-in value or even Carmax (which won't be higher, I'm sure about that) before and believe I have to pay retail, I will DEMAND an explaination why different rules apply to different people although they are filing in the same district. I'm burning for that answer!

[IBroke]

Right now, I'm shocked!

I posted my situation on a different board and was told I could only Redeem if I would pay the entire BALANCE of the loan (rather than the value of the car) due to my co-signer. The judge/trustee wouldn't even have the option to approve a redemption.

If that's the case, what if I would wait until my mum is ready and file with her the same day? Could I then redeem?

[keepmine]

If you're unemployed and have no assets, why are you filing bk? You have nothing anyone can take.Wait until you have some stability in your financial life. Make sure you have a job with insurance benefits at a minimum. You don't want to lay the bk card and then, have a serious illness amd no insurance and you've already filed bk.

[IBroke]

If you're unemployed and have no assets, why are you filing bk? You have nothing anyone can take.Wait until you have some stability in your financial life. Make sure you have a job with insurance benefits at a minimum. You don't want to lay the bk card and then, have a serious illness amd no insurance and you've already filed bk.

I'm 29 and right now, I can't wait for an illness to get the best deal for my BK.

I thought abut this step for quite a while - but with a total debt of about $350K with more than 20 creditors (including a $30K judgement), waiting would only makes things worse.

The decent job is out of reach with that credit-report and with a judgement.

As soon as I would get the job I'm looking for, the judgement is waiting and I can assure you this one won't be the only one.

Right now, a BK would INCREASE my credit-score rather than dragging it down.

Fortunately, in case of an illness, I'm still holding my German passport (have double-nationality). If something goes terrible wrong with my health, social security takes care of me (America is a great country - but there are other countries where you are far better off when you're sick AND poor).