When do you reaffirm

[mrskal]

When do you actually reaffim a vehicle? My 341 is Monday and I plan on reaffirming my van if Ford wants me to. Dont you actually have to sign something with them? I have heard nothing as of yet.

[ccsjoe]

Yes, FMC will force a reaff in most cases. They will send their paperwork to your attorney shortly after the 341. Or to you if pro se. Mine arrived 3 weeks post 341.

[mrskal]

Great thanks, I was not sure if it was before the 341.

[btbeme]

Yes, FMC will force a reaff in most cases.

Not sure that "force" is the right word here. They can strongly suggest, urge you, hint, or otherwise ask...but they cannot force you to do a reaffirmation, nor can they coerce.

They can, of course, retrieve their vehicle should you NOT reaffirm, but, without knowing the details and numbers regarding the vehicle, it is impossible to say whether they would.

[mrskal]

btbeme, I am aware cant force me, I will do it though because it is my work vehicle, I make a living out of it. Bought for 65K, owe 27K and worth 23-25k. if it matters.

[btbeme]

I am not familiar with GA exemptions, but here are some random thoughts...

- A vehicle truly worth 25k and a loan amount of 27k is "underwater" - I would think that would be the best you could ask for, since no exemption would be necessary.

- Banks often have their own idea on the value of a vehicle. Our Honda van booked out at $9k or less on Edmunds and Blue Book both, using the highest private party values. Our bank said it was worth $17k. Huh? Well, OK...

- A vehicle valued over $15-20k is worth the effort to repo. Less than that...hard to say.

So, a reaffirmation may be worth it for peace of mind, and I know Ford acts tough. Just saying that a reaffirmation may not be necessary, if you plan to make payments on time going forward. Sometimes a call to the bank can help them feel more comfy with that type of deal. But, whether or not you reaffirm, if you don't make the payments... that is the problem area.

I totally understand when you say that you cannot afford to live WITHOUT it. Just make sure you can afford to live WITH it before a reaffirmation.

[debee]

From everything I've read about Ford, here and elsewhere, they will repo the car if you don't sign the reaffirmation agreement. They're the worst as far as I know and I've even read that on lawyer blogs.

[IBroke]

Sorry for being a bit off topic here, but there is one question about reaffirming burning under my nails for some time now.

So a car finance company has the right to repo if you don't reaffirm even if you are current. A mortgage-lender CAN'T foreclose if you don't reaffirm if you are current. Both are secured loans.

Can anybody tell me why there is a legal difference between these two scenarios?

[debee]

Where's jb?

The only little bit I know is that foreclosure is governed by state law so has to follow that. They can't begin foreclosure unless you default.

There's an ipso facto clause written into car loans that states you're in default if you file bk. At that point they have the right to repo, but are prevented by the automatic stay. If you indicate that you want to reaffirm and they are willing, then you are back under contract and no repo.

If you indicate that you want to reaffirm and it's refused by your lawyer (&/or the judge if it gets to hearing) then in at least some places, you may get to keep the car whether the creditor likes it or not as long as you stay current. If your loan is with a credit union and you indicate you want to reaffirm, I think those are good to go whether the lawyer/judge approves or not.

[ccsjoe]

Sorry for being a bit off topic here, but there is one question about reaffirming burning under my nails for some time now.

So a car finance company has the right to repo if you don't reaffirm even if you are current. A mortgage-lender CAN'T foreclose if you don't reaffirm if you are current. Both are secured loans.

Can anybody tell me why there is a legal difference between these two scenarios?

IBroke, besides the legal complexity differences between a car loan and a home loan, repossessing a vehicle is much more simple and cheaper than repossessing (foreclosing) a home. It's not that lenders can't foreclose, they choose not to.

[IBroke]

Thank You, folks, for the info!

[IBroke]

There's an ipso facto clause written into car loans that states you're in default if you file bk.

That makes perfect sense. I think that is the same clause found in almost every credit-card agreement as well.

[mrskal]

In what scenario is the judge not going to let you reaffirm? If they dont think you can make the payment? If that is the case, will they take into condsideration that I have someone else that is willing to make payment should I need it? (dad) Gosh, I hope they dont do that to me!

[ccsjoe]

That makes perfect sense. I think that is the same clause found in almost every credit-card agreement as well.

I believe this clause is now illegal, at least when dealing with auto loans. Tom (tcreegan) has posted extensively on it, it has to do with the change in wording of the law in 2005 and sections 541 a - c, where 541 a specifically defines bankruptcy filing as not breach of lease or contract.

Here's what I'm talking about (credit tcreegan posting):

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 lender cannot say we are in a breach of contract, and thus cannot repossess, because we declared BK.

Lender 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.

However, there appears to have been cases already where marking "reaffirm" on the statement of intentions, but having your attorney or the judge 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).

[ccsjoe]

In what scenario is the judge not going to let you reaffirm? If they dont think you can make the payment? If that is the case, will they take into condsideration that I have someone else that is willing to make payment should I need it? (dad) Gosh, I hope they dont do that to me!

Normally a judge will deny the reaffirmation when it is a hardship for debtor. I think this varies greatly and widely by district and judge, most reaff hearings are pro forma. Look at my previous posting referencing section 541c as it may have direct bearing on your situation.