What happens if car equity was exempted BUT creditor decides to repo after filing?

[gman]

At first I was led to believe by a representative at my credit union that as long as I had never been late AND I continued to make payments, they would not try to repo the car during my BK.

I am now being told by the same credit union that they might repo the car if my reaffirmation is denied.

At the current stage, I am opting to TRY and reaffirm. I am getting the paperwork from the credit union to do so. My challenge is that I am unemployed and either the judge or the credit union could deny my reaffirmation request. This has yet to occur, but is a good possibility.

THE CAR HAS $2,000 OF EQUITY THAT I EXEMPTED UNDER MY STATE EXEMPTIONS.

If, for some reason, the reaffirmation is denied AND the credit union opts to repossess, will they need to pay me the difference in equity?

If so, who determines the "value" of the car at the point of repossession?

Note that I determined my value for filing purposes by taking my car into CarMax for an on the spot written cash quote (no requirement to buy a car from them.)

What should I be preparing for given this last second surprise?

Any strategy that makes sense around selling the car before a repo occurs?

[justbroke]

I am now being told by the same credit union that they might repo the car if my reaffirmation is denied.

This is actually District and State specific. In many Districts, so long as you attempted to reaffirm, the credit union (or creditor) cannot repossess because of the bankruptcy. They'd have to follow State non-bankruptcy law regarding repossessions. If you're current... they can't repossess the car in many States. However, this is the intersection of the State non-bankruptcy law and the Bankruptcy Code (Title 11). The real problem is whether the "ipso facto" (I think that's how it's spelled) clause in almost all agreements, that triggers a material default or breech of contract when filing for bankruptcy, is permissible under State non-bankruptcy law.

At the current stage, I am opting to TRY and reaffirm. I am getting the paperwork from the credit union to do so. My challenge is that I am unemployed and either the judge or the credit union could deny my reaffirmation request. This has yet to occur, but is a good possibility.

It is likely that it will be denied since you're unemployed. The Judge would be doing you a favor by denying the reaffirmation agreement. The problem is that you'd probably need to check the "undue hardship" box, and I've yet to see a Judge approve one when that box is checked and the person is not working.

If, for some reason, the reaffirmation is denied AND the credit union opts to repossess, will they need to pay me the difference in equity?

They would have to pay you after the sale of the vehicle and paying off the loan. The difference would be yours. You would not get "your" money first.

If so, who determines the "value" of the car at the point of repossession?

The market. It's usually the liquidation value or "trade-in" value that it would probably get at auction. Then you'd have to factor storage costs, fees for the auction, etc.

What should I be preparing for given this last second surprise?

You should be studying bankruptcy cases in your District/State surrounding the issue of whether a car can be repossessed if you are current and otherwise have not defaulted. Years ago, a bankruptcy was a material default of the installment agreement. However, I believe that this has changed under the BAPCPA. If you're in the 9th or 11th Circuit, sorry, you must redeem, reaffirm or surrender.

Well, you are in the 11th Circuit (Georgia, Alabama, Florida), and Taylor (In re Taylor, 3 F.3d 1512 (11th Cir. 1993)) is still the law.

[gman]

You should be studying bankruptcy cases in your District/State surrounding the issue of whether a car can be repossessed if you are current and otherwise have not defaulted. Years ago, a bankruptcy was a material default of the installment agreement. However, I believe that this has changed under the BAPCPA. If you're in the 9th or 11th Circuit, sorry, you must redeem, reaffirm or surrender.

Well, you are in the 11th Circuit (Georgia, Alabama, Florida), and Taylor (In re Taylor, 3 F.3d 1512 (11th Cir. 1993)) is still the law.

Found this recent case here in Georgia (Goodman, 2009).

http://www.georgiabankruptcyblog.com/archives/northern-district-cases-nd-ga-court-may-consider-reaffirmation-agreement-where-debtors-attorney-refuses-to-provide-certification.html

Specifically, check out the last paragraph and the instructions the judge gave to the debtor.

What do you think my reality will be given this?

[justbroke]

What do you think my reality will be given this?

I think it hurts you. First, the reaffirmation was found to be an undue hardship so the Judge didn't sign it. I don't think the creditor was going to enforce their in rem rights if the debt was current... so it wasn't an issue. If your Credit Union has threatened repossession unless the reaffirmation agreement is approved, you're in a different situation.

Remember, enforcement of in rem rights is up to the lienholder. There is nothing forcing a lienholder to take action, and you can't force them to not take any action when it's their right. In other words, if your reaffirmation agreement is rejected, then everything is in the Credit Union's hands.

[gman]

If I get to the point where I find out the reaffirmation is "denied" - should I possibly short-circuit the issue and sell the car on the spot to CarMax and payoff the loan?

This will get me the most equity (as I'd lose a bunch through the repo process itself with fees, costs, etc.)

Ideas?

[justbroke]

If I get to the point where I find out the reaffirmation is "denied" - should I possibly short-circuit the issue and sell the car on the spot to CarMax and payoff the loan?

Now that's thinking outside the box. Absolutely. I'm assuming that CarMax will deal with the title issues. Perhaps CarMax can put you in a new car with a new loan, and at a good rate? That would kill the proverbial two birds.

[Dee]

If you're in the 9th or 11th Circuit, sorry, you must redeem, reaffirm or surrender.

Well, you are in the 11th Circuit (Georgia, Alabama, Florida), and Taylor (In re Taylor, 3 F.3d 1512 (11th Cir. 1993)) is still the law.

Do you mean that you must be willing to reaffirm, or does it actually have to be approved? I'm hoping to reaffirm, since I'm current with about $9,ooo in equity and only 12 months left till payoff. We have negative DMI, though. Also does anyone have experience with Suntrust and know if they will just let me continue to pay if the reaffirmation isn't approved? If they would repo, even if current, I like gman's idea of selling it to Carmax pronto!

[BROKEDED]

If I get to the point where I find out the reaffirmation is "denied" - should I possibly short-circuit the issue and sell the car on the spot to CarMax and payoff the loan?

This will get me the most equity (as I'd lose a bunch through the repo process itself with fees, costs, etc.)

Ideas?

That's exactly what I was about to suggest. It's doubtful that you'd get Carmax to give you any more for the vehicle even if it was detailed before taking it in unless you took it by there in very dirty condition. It doesn't help to take it to a different Carmax either. They have your info on file for at least 6 months. Most regular dealers won't buy outright but if you find one and have something desireable you could flat out show them Carmax's offer and ask them to beat it. Might not be worth the trouble in a pinch but wouldn't hurt to try ahead of time to get an idea.