Let me get this straight about car reaffirmation

[chucko]

If I don't sign the reaffirmation and keep paying, I can keep the car as long as I want.

Say my BK has been discharged for 1 year. My credit is built back up somewhat, and I can get a decent car loan. Can I stop paying on the car, give it up, and have no negative affects? Will they then kill my credit? Or won't it matter because it was essentially discharged and I was voluntarily paying?

The question is 1 year after BK discharge, you give up car voluntarily, does it affect your credit if you didn't sign a reaffirm?

[StaciMM]

If you don't reaffirm, they cannot report anything after bankruptcy. You would probably want to schedule it so that you're ready to give it up just before a payment is due-as you wouldn't want to count on them giving you any grace period.

When you're done, call them and arrange to have them come & get it or take it to a dealership. (We gave up 2 vehicles, did both. There was no longer a Mitsubishi dealership near us, and I was not going to drive it 30-40 minutes away.)

[AAAArt]

If you don't reaffirm, they cannot report anything after bankruptcy. You would probably want to schedule it so that you're ready to give it up just before a payment is due-as you wouldn't want to count on them giving you any grace period.

Staci, once again I'm confused. (I'm so glad that we can have this back and forth discussion...it really helps!)
My question, In my mind, this car (or actually the loan on it) was not included in the Bk. because although it was listed, he kept making payments on it.
It was not re-affirmed, so he can walk away from it and they cannot come after him for payment by garnishing his wages, etc. That part I understand.
What I don't understand is why they could not list it now as a charge off, since he did not re-affirm or give it back at the time of Bk. "My logic" (sometimes far from perfect) says that when he kept making payments, the clock started again and now they can call it acharge off and cause a lowering of his credit score.
That's the only part that I don't understand. Why wouldn't his credit score be affected?
Actually you didn't address this one way or the other, but it got me to wondering. Can anyone give me "chapter and verse" or personal experience?
Thanks, Art

[quest42]

What's the rule?

..."My logic" (sometimes far from perfect) says that when he kept making payments, the clock started again and now they can call it a charge off and cause a lowering of his credit score. ...

I like Staci's explanation but... hmmm... Art's reasoning sounds very logical to me... wondering what the rules are in this situation?

If the creditor claims the charge off to the IRS as a bad debt, then there's gonna be a tax liability for the debtor, also... besides the potential hit on his credit report downstream from the BK... maybe?

Sounds more and more like surrender is the way to go... if you cannot scrape up cash for redemption... and your loan balance is upside down with the value of the vehicle... once the magic of the automatic stay is over... the free ride is over!?

Does making a payment reset some of the benefits of filing BK?

Probably NOT, see next post...

[quest42]

Some good info...

Speaking from personal experience.....it DOES make a difference on your credit report if you SIGN a Reaffirmation or not. If you DO sign a Reaffirmation...your tradeline is noted "Included in BK- Reaffirmed Debt". Once it is noted as such...your continued payment history IS REPORTED and as long as you are ON TIME it will continue as a "Satisfactory Account".

If you do NOT sign a Reaffirmation and just continue to make payments...the tradeline will only show as "Included or Discharged in BK" and they will NOT report any payment history..because it is a DISCHARGED debt and they are not permiited by law to report anything more after the BK filing date on such an account of this categorization.

Again, from personal experience, a creditor MAY change your terms in order to allow you to Reaffirm the debt. They can raise your interest rate to a default rate and give you a different timeline to pay off the debt. The creditor is also able to negotiate a Redemption for a "fair market value" repayment plan. In the case of automobiles, a creditor MAY renegotiate for you to repay whatever the vehicle is worth..which may be much less than your loan payoff.

Reaffirming is basically recommitting legally by contract to the amount owed on the debt without BK protection and continuing the CB reporting.

Redeeming is renegotiating the debt by reducing the amount owed to being only what the vehicle is worth.

Everything is done at the discretion fo the Creditor. Some creditors, like Credit Unions, REQUIRE a signed Reaffirmation while other lenders may not require them as long as you continue to pay ON TIME.

Still..whether or not you earn a Positive Satisfactory tradeline or Discharged negative tradeline depends on whether or not you sign a Reaffirmation. Reaffirmations are also only legal if presented and approved as being within your best interests to repay by the BK Court..and entered into your BK record.

Note: I signed a Reaffirmation, paid my loan off on time perfectly, had continued POSITIVE reporting as a result. And...a few months after it was paid off in full, on time....I wrote a shmoozy GoodWill Letter and the Creditor removed ALL notations of BK.

http://www.bankruptcyforum.com/showt...0605#post10605



NOTE: your BK judge must approve any reaffirmation agreement as being fair to the debtor.

Bottom line?

If you retain and make payments with no reaffirmation... there is no penalty later, if you ever stop making those payments and surrender the property, it seems... Yes?

Art, you worry too much... Staci had it right!

[quest42]

The next question is...

Can they assess any "late charges" during the automatic stay?

My guess... yes they can???

[bkfiler]

yes all charges can still be applied. interest, late charges, collection fees, attorney fees, etc.

[StaciMM]

NONONONONONO.

If you not reaffirm, the bankruptcy discharge applies to your ENTIRE obligation to pay this account. They cannot assess or charge anything more. Now, keep in mind this applies to giving the vehicle up.

The bk discharges your responsibility for any & all payment, but it does not change the fact that the lender owns the car. If you want to keep it, you do have to satisfy the lender. Kind of the old 'if you want to play at my house, you play my way' theory.

[StaciMM]

Aaaart-

If a debt is listed in BK, no matter what, the creditor cannot pursue anything more from the person after. How they list it - internally and for their own tax records - is up to them. Their accounting is not based on the person's credit report.

A CO gets listed on your credit when you default on something you owe. After BK, you no longer owe it. It should simply say $0 for balance, and it could have some note to indicate it was included in BK. They could still report anything that happened before the BK. So, for something that became a CO in July and you filed in Oct, it could list as 'account charged off, included in bankruptcy'.

[quest42]

AHA! That explains one current mystery about my vehicle loan:

The day before I filed BK, there was a $17.50 "late charge" in my online record -- for a late payment from last year -- I have been paying the standard monthly amount each month, never paid the "late charge" ... now, presto, the "late charge" has just disappeared!

I am current with my payments... but am considering surrendering it... will decide by the time of my 341 meeting... happens to be the day after my next payment is due.

Will the trustee have any objection if I surrender that truck (owe $4,500 and book value is 3,500) and use the monthly payment for a different vehicle worth $2,500? Should I simply call the trustee on the phone to ask?

[StaciMM]

Quest-it shouldn't be an issue. I tried to update our trustee on our car situation-he wasn't worried about it.

[AAAArt]

Thanks everyone. My faulty logic was that I wasn't considering it as discharged if you ept paying on it, even if you did not do a re-affirmation.
And yes, I do worry too much. And I'm also too inquisitive. I want to know everything about whatever I am involved in and know it yesterday.
Add lack of patience to my list of faults.
In normal face to face conversation, I could simply say, "I don't understand, could you explain more?" In cybertalk, it's more difficult, but I am thankful for the explanations.
Thanks to everyone. especially Staci. Art

[StaciMM]

Inquisitive is good! Better to ask than to not know.