Reaffirmation of vehicle...please explain

[gogetter76]

Hello,

Got a reaffirmation from GMAC for the vehicle. Please help me.

Is it basically just reaffirmaing you are going to pay? Is there anything hidden?

We can afford it. We need it.

Any other consequences?

Thanks

[mtbc]

You might have to tell the judge that it's a good idea, and they might want to know that you weren't pressured into it, but it sounds like it'll probably make sense so long as your schedules I/J make it look like you'll be able to afford the agreed monthly installment.

[gogetter76]

HHHMMM.

Thanks. that seems to be a problem. I and J do not add up for us to be able to afford it. My wife is a Cosmetologist an when giving income, it was an average and of course did not include any tips, since they vary so much.

In general, when adding up everything on I and J should it come to zero or a little more? How far negative would be good or raise a flag?

Thanks again

[StartingOver08]

Do you have equity in the vehicle or are you upside down?

Is your attorney willing to sign the reaffirmation or do you have to go in front of the judge?

Is the actual payment a hardship for you or is it ok now that the rest of your unsecured debt will be discharged?

Who is the lender on your vehicle? Some of them will repo even if you are current: Ford and Chrystler come to mind. Most lenders will leave you alone if you are current. Ooops...I see it is GMAC.

Have you tried to renegotiate the payment with the BK dept of your lender yet? Some will work with you and others will only allow you to keep the terms that are existing on the current loan agreement. IF you are able to renegotiate, then you will want the new terms to be in the reaffirmation agreement.

The answers to the above will help you to decide whether it is in your best interest to reaffirm or to just ride through.

[mtbc]

Schedules I/J are just about (justifiable) expectations. It's reasonable to include something for tips if you expect to be getting some.

[mtbc]

I'd add, how far over 0 you go for schedule J depends partly on how well you can argue against adjustments to your figures that push it even higher and make you look like a chapter 13 possibility. Your attorney should have a good guess about what numbers your trustee tends not to blink at, and how compelling they'll find your evidence supporting your expectations.

My impression is that you don't want the difference being positive to the tune of more than a few tens of dollars. A couple of hundred starts getting very dodgy indeed. Most people seem to report a small negative to be on the safe side. Ours was -45 but we're not trying to reaffirm anything.

[onwards]

For what it's worth, when I did mine, my lawyer gave me the following insight:

Assuming there is no pressure involved, you can choose to try to reaffirm a car loan. That does not mean you get to do it though. What happens then is that the judge takes a look at it, takes a look at your filing, and decides if it makes sense. If it does, your reaffirmation is approved and you now owe the money regardless of the filing (which is actually not necessarily such a great thing).

The better result is that the judge decides you can't afford it. At THAT point your car loan default into a "retain and pay" situation; as long as you keep making payments, they can't repossess, but if you stop they can but you are no longer responsible for the loan. Same as with a house.

Before 2005 you could file a "retain and pay" for vehicles too, but no longer. Now it comes as a result of the judge rejecting your reaff agreement.

[mtbc]

Thank you -- you make a good point. Is it generally true with secured debt that so long as you keep the payments current the creditor has to swallow it and let you keep the thing? I'd gotten that impression, but as our schedule D is empty I didn't have to care.

[onwards]

Thank you -- you make a good point. Is it generally true with secured debt that so long as you keep the payments current the creditor has to swallow it and let you keep the thing? I'd gotten that impression, but as our schedule D is empty I didn't have to care.

Well...

A common misunderstanding about the bankruptcy process is the idea that your debts are gone, or struck, or erased. That is patently untrue.

What happens in a BK proceeding is that your debts can no longer be collected from you. They still stand; it is then up to the lender to decide what to do with them.

In the matter of an unsecured debt, from a practical standpoint, the debt becomes uncollectable and their best remedy at that point is to write them off and get a tax benefit from the writeoff. In some cases lenders have taken default insurance on your debt (without your knowledge), at which point your BK triggers an insurance payment that pays off the debt.

In the matter of secured debt, the underlying asset securitizing the note still exists, and thus the debt is still collectable. However, there is no real point for the lender to foreclose on your right to redeem the asset (that's what foreclosure means) if you keep your end of the contract. Hence "retain and pay". The debt is still not collectable from you, but as long as you're paying, there is no need for further action.

I hope that makes sense.

[aces67]

Thank you -- you make a good point. Is it generally true with secured debt that so long as you keep the payments current the creditor has to swallow it and let you keep the thing? I'd gotten that impression, but as our schedule D is empty I didn't have to care.

Generally speaking if you pay on time they can't come repo it in most states. You should ask your lawyer to be sure for your state though.

How much longer do you owe on the car? What year model is it? How many miles are on it? What kind of shape is it in?

[JustFileSuit]

It is not "entirely" accurate to say that you can go on as before without a reaffirmation or some alternate arrangement, as the BK Petition, when granted, vacates the contract of finance and the contract of purchase. You make the auto payments - BUT: what happens after the last payment?

Technically, you no longer have an enforceable contract- the contract was vacated within the bankruptcy process. How do you propose to obtain clear title? I see no mechanism to oblige the lender to turn it over to you. He can treat the payments are nothing more than rental payments. You see the problem...

I invite other readers to post in on this. I am not representing that this is "The Last Word" of wisdom on the issue. I DO say that the process of shedding a contract means that the entire contract is shed; you don't get to keep the future benefit (transfer of title) where the lender gets to absorb all potential future losses. (If you don't pay, and wreck the auto, and so forth).

For the specific issue of this particular set of circumstances: since it is a strain on you with the current payment, go get a lower payment negotiated and affirm that new contract as a substitute for the one you have. then, when you are all done, you can enforce the transfer of title. Just a thought...