Car loan reaffirm????

[csonly]

I orginally posted this to another thread, but thought I should start a new post in order to get more responses. I'm very new to this forum and appreciate all your input...

I'm very confused about car reaffirms. My lawyer advised us not to, but I wanted to get more input from you all. I have 2 loans through Wells Fargo. They are both behind on payments but less than 30 days. I will be able to make the payments as they are right now unless something bad happens to us (job loss, etc.). WF offered a reaffirm on both of them, dropping the interest rate drastically. For both, it would be over $300 less per month. These cars have big balances and no way are worth what we owe, owing like 19K and 22K. Years of payoff are 10/2015 and 9/2014. WF said that reaffirming will help build our credit, but not reaffirming will not show anything payment made on our credit report. WF also said we could just reaffirm one and not the other if we chose. Can you all shed some light on why reaffirming a car loan is not in our best interest. Thank you. Also, while I'm on the subject of a credit report, we are keeping our house, so how will this show on our credit report when all is said and done after discharge?

Filed beginning of Nov. No word on 341 meeting yet.

[drowning123]

Reaffirmation is not advisable because of future manageability to make payments and liability. Bankruptcy makes you off the hook. Reaffirmation means you're back on the hook if can't make the payments. They can still take the car under the reaffirmation agreement and they can come after you for the balance, so what's the use of making yourself legally responsible again for a car that you'll probably replace in 3 years? If you're absolutely in LOVE with the car, then you're choosing with your heart and not your dollars and "sense". It's really up to you.

[csonly]

So for instance without a reaffirm, at any time even in a few years, if I want to get rid of the car, I can give it back to the lender with no strings attached and walk away from it?

[researchnerd]

This can be a tough choice. I recently decided not to reaffirm Trixie, my beloved 2009 Mazda, because she had ~$10k negative equity. In addition to not wanting to take the risk of getting stuck with a deficiency, my feeling was...if I'm going to go through all the trouble, expense and anxiety of filing BK to get rid of my debt, I'm going to get rid of ALL my debt. It's not a fresh start if I'm $10k in the hole. It was the right decision for me, but I still cried when they towed her away a couple of weeks ago. I really should know better than to name my cars.

If your cars are underwater, please think twice before reaffirming. If you absolutely have to do it, maybe choose the car that's closest to being worth as much as you owe on it, and let the other one go. Please don't do it just to rebuild your credit - that is WF's sales pitch to convince you to reaffirm. It's great that they dropped your interest rate, but if someone loses a job or gets sick, and you can't make the payments, you will not only lose your cars but will also be on the hook for any negative equity -- and you won't be able to discharge it in BK.

Edited to add: We chose to keep DH's truck because it is worth almost exactly what he owes on it (Toyotas hold their value well), it's less than two years from being paid off, the interest is really low and the lender (BoA) was fine with us keeping it as long as we're current on the payments. Theoretically, yes -- if we wanted to get rid of it and couldn't sell it, we could always give it back to the lender and be free and clear. Be careful though - some lenders (like mine, a credit union) will automatically repo if you don't reaffirm. It would be worth asking WF what their policy is on that.

[tcreegan]

Hi csonly,

You kinda answered your own question right here:

able to make the payments as they are right now unless something bad happens to us (job loss, etc.).
have big balances and no way are worth what we owe, owing like 19K and 22K. a

When something bad happens, if not reaffirmed you hand over the keys and walk away. Reaffirmed upside down loans, you will most likely end up with a judgement against you.

Don't make BK decisions based on your credit report; do what makes the most sense from a 'cash in hand' financial point of view. Your BK is going to tank your score into the 500's; current/reaffirmed/not reaffirmed/reported/not reported/pre-BK entries...these things are worth 10-30 points. And post-BK, cleaning up your credit reports and some simple rebuilding gets back 50-100 points or more, sometime in a matter of months. Keep at it and it is not hard to get back into the 600's to 700's in a year or two.

Reaffirming carries a big risk, to do so for 20pts on your credit report is not worth it, especially when simply cleaning up your credit report might boost you 100 pts or so.

Reaffirmed and not reaffirmed, either can be reported by your lender. Usually reporting stops when you file BK, and some lenders want written permission to start reporting again post-BK (And some lenders keep reporting through the whole thing like nothing happened) And, duh, stay current w/ no lates.

Tom in Colo