Question on Reaffirmation

[LJoutWest]

Ok, our attorney contacted my wife today and had some questions. One being in our reaffirmation with our car loan he wanted to know how we were going to explain on the paperwork that we could reaffirm our loan while being in the negative on expenses vs income on our paperwork? Any suggestions on how to approach this? We own 2 cars, a 1996 Nissan that I drive and a 2005 which is not valued at the loan and which the trustee did not take based on the reaffirmation. We are in Ut.

So my questions:

1) How do we respond to the question of how do we explain reaffirming the loan when it takes us into the negative?

Our answer so far is we say that the loan at $295 is not a hardship, we have never defaulted or been late on the loan and the car is needed so my wife, whose income is higher than mine significantly can go to work. The car is valued at $2500 on our paperwork. Any suggestions or insights would be appreciated.

I am only presenting my wife's side so I haven't talked to our attorney myself yet.

[LimpDisc]

I'm guessing from your post that you're upside down on the car. If that's correct, how much are you upside down? The judge will surely look at the loan to value ratio.

Were upside down on one of our cars by about $5,000 and will list it as reaffirming on our intentions. Our attorney said he highly doubts a judge will approve us reaffirming being that far upside down.

[LJoutWest]

On the paperwork the car is listed from a KBJ (not sure but it starts with a K) as a value of $2030. We owe $7993 total, and unsecured is $4993. Blue book shows a higher value for the car and the $295 is part of our expenses. Not sure what to do on this. I could take out a 401k loan to pay the unsecure part but not sure how the Trustee would look upon that. We have to have two cars, and this 2005 has 160k miles on it.

[LimpDisc]

Is your auto loan company requiring you to reaffirm?

I haven't followed all your posts. Have you already filed? If not, what about choosing to redeem the car. You could then buy out the car at actual value.

[LJoutWest]

Yes, we have filed, and have had our 341. We are over the median but have UMI of -$932, and had to resubmit out amended forms last Wednesday. If we want the car we have to reaffirm.

[NoMoreCards]

Taking out a 401k loan while in active BK is a terrible idea. You would be taking a asset that is completely secure, and turning it into not secure. The trustee could take it.

However reaffirming a vehicle that you are so far upside down in isn't in your best interest either. IMO

What I would do...and actually did during my BK was to return the car, and once discharge came, took out a 401k loan and bought another vehicle.

In the 40 days or so period between returning the car and discharge I got a beater car to drive. Now that I have the good vehicle, I can sell the beater and get my money back if I choose to.

You have options, just look at them all before reaffirmation of a car that you are so far upside down in.

[FinallyBK]

I agree with NoMoreCards about taking a loan from 401K at this point. When you are in Bankruptcy they won't come after you for the car but after that you could buy an older version with 401K loan. Why reaffirm something that is so upside down, and won't give you fresh start after BK. Anyway no judge is going to let you reaffirm something that is 3x the value of the car. Think hard Make good choices.

[aces67]

I would let it go back also. It's not worth what you owe on it. You can get something else once your discharged.

[LJoutWest]

Thanks, appreciate. Looking at we can get something else after discharge.