Reaffirmation of an auto loan

[IBroke]

Trustee makes the suggestion. Judge is not at the 341 meeting.

Ah, OK, that makes sense then.

[tcreegan]

Hi all,

The reaffirmation needs to be approved either by your lawyer, who just sends in the paperwork, or the judge who holds a hearing on the matter.
Most experienced BK lawyers will not sign off on reaffirmation, it is not in your best interests and they get exposed to some liability.
What judges do is highly variable, some almost never approve, some give it only a cursory look. That said, the odds a judge will approve go down as the payment goes up, unless there is a lot of equity, it was modified for a disability, work some other extenuating factor.

Some people get so caught up in the feeling "I need my car!" that they have a hard time stepping back and looking at it from an impartial financial point of view. Work out a budget (on paper/computer), put in all the expenses you have been doing w/o, including a decent contribution to savings and retirement accts, plus housing, household expenses, utilities, medical, etc. Ask, 'how are these going to change between now and the end of the car loan?' Now figure what you can afford for a car payment (include taxes and insurance). Then look at your car payment. Then look at the equity you have in the car. Then ask yourself, is this the best for my financial future or should I go get a low-mileage used car for what I can easily afford?

Good luck w your decision car folks!

Tom in Colo

ps: take the # of months left in your loan and multiply it by the payment. Compare this to the value the car will have at the end of the loan.

pps: if you want to keep your car, stay current on the payments and insurance even if the lender cuts off contact during the BK.

[IBroke]

Hopefully, I can get my reaffirmation approved. Although I do not have any income, it is a joined loan with my mother who is making the payments. The car is 11 years old, has 9 payments remaining and the loan-balance probably equals its trade-in value. The monthly payment is $300.

In my case, getting a different car instead of keeping the current loan probably won't save me a dime and is not even an option. First, how am I supposed to get an approval on a loan without an income AND a BK on my credit-report AND without a decent downpayment? And since it's crucial for me to have some sort of transportation (otherwise, how am I supposed to find a job without a car?), I think it's only fair that I stay responsible for this loan in the same way as my mother is if I'm planning to use this car as well. And keeping those car-payments on my credit-report might increase my chances of getting my own reliable transportation as soon as I get a job.

I hope the judge sees it like that, too. Denying my reaffirmation won't help me at all.

[dumpinmydebt]

No, I wouldn't be in a horrible position because I am capable of paying it. Does anyone know the rules re this? If there is money left over after all expenses isn't it my choice if I want to keep it? If my car were taken I wouldn't have any transportation to work and I'm sure that a new car loan would be very expensive due to having no down payment and a much higher interest rate. Can a car be taken from you if you have never missed a payment and agree to continue making the payments?

It is your choice to keep it, but it's the courts choice to approve a reaffirmation.

You're taking this a little too personal. Take how you feel out of this and look at the facts. You're not going to find any emotional reasoning behind anything the court or trustee says or does. Their decisions are not based on emotion because this is a business decision.

Your car payment is nearly twice the IRS allowance. The allowance for one car is $496. Your payment is going to be an automatic red flag for the Trustee. They will take a long hard look at your expenses. And they will take a real hard look if it's a luxury car.

Now, even if they don't approve the reaffirmation, there is a chance you can ride through. But that depends on the lender. They still have every right to repo your car at any time. It does not matter if you are not late or have never been late. The debt you are paying on will be included in the bankruptcy. They are permitted to take back their collateral to recoup their losses.

[drowning123]

That's what we've been sayin' dumpin', but Michelle is really attached to that car.

[dumpinmydebt]

That's what we've been sayin' dumpin', but Michelle is really attached to that car.

I see. Just thought I'd add another voice of reason to the group. Lol.

[stormy]

My reaffirmation was just approved yesterday but my payment is only $470 so I'm under the IRS standard. There's no way I would have reaffirmed my car if my payment was as much as yours. Just my .02

[Michellemg]

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[rjmwx81]

Don't take it personally. No one's judging you for having an expensive car, we're just letting you know that keeping the car is going to be very, very difficult. The problem is, whether you have a problem paying for the car or not, once you file BK the decision is out of your hands. It's no longer what you think you can afford, or the type of car you think you should have. It's all about what the judge and trustee think you can afford and whether your payment exceeds the IRS allowances. Which it does. By a lot.

I believe you when you say you can comfortably afford the payment, but that's only half the battle. You're only entitled to "reasonable" expenses and the IRS guidelines say that a car payment that large is not reasonable. Your main problem is not the reaffirmation, it's the Schedule J expense.

Now, a savvy lawyer might know of some way to get that massive car payment by the trustee and still keep you in a Chapter 7. But I don't see any clear-cut way to make that happen. It seems to me that you can keep the car and do a Chapter 13, or stay in a Chapter 7 and lose the car. Again, though, I'm not an attorney, so you'd be wise to consult with one or two. Or ten.

[drowning123]

Well said rjmwx.

[ironpirate]

I am now becoming concerned because I have read that there are cases where the judge refuses to let you reaffirm your car. My car payment is $944 per month and I am now making only about $2600. net monthly. Yes, I know that it is a large payment for my income but my life has changed drastically as of late. I was always told by people that I could reaffirm my auto loan but am now worried. I know that I can continue making my car payments and pay off the car. Can anyone give me additional info regarding this?

Wow are you serious? Your car payment is more than my mortgage payment. You should hope they take that car from you. Why the hell would you want to keep a car with a high payment? Whats the balance, interest rate, months left on term? You know that cars go way down in value right and you could use that money for a much better use. You're not rich and you should not have such a car. You can get a nice much cheaper car, that you won't be car poor. Thats whats wrong with society today everybody wants to act like they have money and buy an expensive car with high car payments and want people to be jealous of them and they don't make a lot of money and live in an apartment. Over half your income is going towards your car payment, gas, insurance. end rant/

[rjmwx81]

No one's judging you for having an expensive car

Wow are you serious? Your car payment is more than my mortgage payment. You should hope they take that car from you. Why the hell would you want to keep a car with a high payment? Whats the balance, interest rate, months left on term? You know that cars go way down in value right and you could use that money for a much better use. You're not rich and you should not have such a car.

I stand corrected.

[drowning123]

I stand corrected.

Didn't see that either. LOL. Michelle, no one's making fun of you, though. Seriously. We're very helpful and caring around here. We offer advice, whether it's what you want to hear or not. Now and then we get a ragamuffin who says it directly like ironpirate. :-) But please do consider the consequences of keeping such a car (if you're allowed to keep it, that is).

[NoMoreCards]

I think one thing to remember is that although you feel you can afford that high of a payment now, what about down the road. I assume you have living expenses, like to eat, need clothing and such. So for right now, perhaps it isn't a problem. But life changes, that is one thing that is certain. You may need to afford things other than a car at some point in the future. Hopefully the car is almost paid off, I hear tires are rough on the digestive track.
I sincerely hope things work out the way you want and life throws you no financial curve-balls, because you will not be in a position to handle them if you keep that car.
Just something to consider.

[Ann]

Michellemg, just out of curiosity what kind of car are we talking about here?