Totally Confused

[wnguyen]

It's the reaffirmation again. Totally sucks! I called Toyota a week ago asking about this and I did ask them twice about if I chose not to sign the reaffirmation agreement, they would not repo the vehicle if I keep the loan current. Now I got the paperwork from my lawyer that Toyota wants reaffirmation. Their Asset Protection Analyst sent the stuff out with the letter, one paragraph stating that In the event your client fails to timely Reaffirm the debt for this vehicle, please be advised that under Section 521(a)(6) of the Bankruptcy Code, the automatic stay shall terminate 45 days after the 341a Meeting. Pay and retains is no longer an option.

I thought they would leave me alone if I keep making monthly payment even if I don't reaffirm. Should I sign the paperwork? It seems that if I don't, I risk losing it even if I'm current. I know my lawyer would say reaffirm it because I have positive balance on my budget of $55.

[scorpion35]

are u upside down on the loan?
how many months are left?
can u afford the payments?

just as an example ,i have 12 payments left on my truck so i will be reaffirming it.
i called the CU thats holds the note and they said as long as i reaffirm and make payments on time just like i am doing now i am golden

[drowning123]

What is your gut telling you?

[tyson24]

I reaffirmed the loan on a car when I filed in 1998, and they made me do it. Otherwise they would take the car. I would say if you do not intend on getting rid of the car, I would sign it, but that is just me. I also had a cosigner that I had to protect though and knew I would not get another loan in the interim. I say if you plan on keeping it I would sign. If in your foreseeable future you do not see that, then I would not. I sold the car outright 8 months after that and got a loan on another car. Times have changed though. Hope this helps.

[wnguyen]

Thanks all of you for your quick replies.

scorpion, I think I'm about even or a little positive. One thing that irks me on this is that I have 46 payments left. That's a LONG time to go in this economy. Right now I can still afford it but I just don't want to be tied down with this.

drowning, my guts telling me to keep the car and don't sign the reaffirm

tyson, that's exactly what my lawyer told me after the 341 hearing. The problem is if I sign it, then I got nothing to fall back on if something bad happens, then I'd be totally screwed.

[tyson24]

If you can part with the car, and if calling their bluff by not signing doesn't work and they come and get it, you just have to find another car.

If you can part with it, don't sign.

[tcreegan]

Hi wnguyen,

In the pre-2005 BK law there was a 'retain and pay' option available in the BK code. The post-2005 BK code got rid of that option, leaving only surrender, redeem, or reaffirmation. Hence the wording in the letter from Toyota. But the BK code has two somewhat conflicting sections, and you are caught between them.

11 U.S.C. §541(c)
Contracts (and usually in auto loan contracts) can have what is called an "ipso facto" clause stating that declaring BK is a breach of the contract.
But 11 U.S.C. §541(c) of the BK code gets rid of the BK clause in consumer debt contracts (such as an auto loan):

...that is conditioned on the insolvency or financial condition of the debtor, on the commencement of a case under this title, or on the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement, and that effects or gives an option to effect a forfeiture, modification, or termination of the debtor’s interest in property. 11 U.S.C. §365(e)(1) also backs this up. So Toyota cannot say you are in a breach of contract, and thus cannot repossess, because you declared BK

11 U.S.C. §521(a)(6)
Toyota is also right because the BK code section does require a debtor under 11 U.S.C. §521(a)(6) to "not retain possession" (surrender), or "sign an agreement" (reaffirm), or "redeem such property (redeem) within 45 days of the 341 meeting.

So what is the bottom line? Caselaw is building up saying that marking "reaffirm" on the statement of intentions but having your attorney or the court not approve it is enough to satisfy 11 U.S.C. §521(a)(6) and that the lender cannot repossess due to 11 U.S.C. §541(c)

Clear as mud?

Tom in Colo

[tcreegan]

oops.....within 45 days of the 341 meeting should be "45 days after the 341"

[backtoschool]

Typically, if you do not redeem or reaffirm, its usually when you don't have that many payments left on the car and you can simply send in the few remaining payments without any statements being sent to you. But a car loan with 42 payments still outstanding, that is not reaffirmed will definitely be on the radar of the finance company, and they will repossess the car if you do not make the payments.

The lender always has the right to repossess the car if you stop making payments of course. Not reaffirming the car is not going to make the car yours for free. If you miss a payment, the lender has every legal right to repossess the car.

[IBroke]

In my case, fortunately, the auto-loan is not such a big problem. We (my mother and me, it's a co-signed loan) are currently on a 36 months loan with less than a year of payments remaining. Loan-balance and estimated trade-in balance at about $2,700 - so not upside-down too much - if at all. Although the interest-rates sucks (23%), it is our only car (so we simply can't afford to surrender it), we have a spotless payment-history on this account, it's quite reliable with the exception of some minor repairs and the lower balance makes the interest we are currently paying less painful.

I actually WANT to reaffirm because I'm planning to use the remaining months of this loan to re-build my credit-history after discharge. The reaffirmation-agreement is going to include a clause how they are supposed to report the loan - no derogatory "IIB"-notations, please..

Once the car is paid off, we own it free and clear and I've done something productive to rebuild my (Auto)-Fico. What we are paying in interest for the remaining months could be recovered due to the potentially better credit-score once we decide to get a new car.

I only hope the judge is not having an issue with my reaffirmation because I don't have any income. But on the other hand, that is nothing new. After all, everybody needs a car and it won't get any cheaper than that. and there is a co-signer making all the payments in the first place.

[SunkShip]

wnguyen, it seems from reading here that some loan companies will allow you to retain and pay as it is easier for them than repossessing the car. And other companies insist upon a reaffirmation (as bankruptcy law allows them to do) or they will take the car regardless of payments being current. You are in a good position because you know what Toyota expects of you in advance and can make an informed decision.

I have a Ford Motor Credit loan and I know that I will be required to reaffirm the loan with them or my truck will be gone one morning. At least I know.

[ironpirate]

I thought you had to sign a reaffirmation agreement on vehicles if you wanted to keep them. That's what I did with my Toyota.

[drowning123]

I thought you had to sign a reaffirmation agreement on vehicles if you wanted to keep them. That's what I did with my Toyota.

Yep, Toyota seems to insist on reaffirmation agreements. Seems like this is only way to go if one wants to keep the car.

[wnguyen]

Good morning everyone

I've just talked with my attorney today and she told me to just disregard that reaffirmation. It seems that she won't sign it either. She also told me that they, Toyota, won't take my car if I don't sign it, just have to keep making monthly payment on it. What a relief!

Thanks all of you for your input, tyson, Tom, backtoschool, IBroke, SunkShip, ironpirate and drowning.

Tom, my lawyer was surprised by how much I 'know' about this stuff, thanks to you

[drowning123]

You're welcome wnguyen. I felt confident talking to my lawyer as well thanks to all the info here. Good luck!