Question about Auto Loan Reaffirmation in Arizona

[blueeyz]

Hello. I am awaiting chapter 7 discharge. We had our 341 meeting 3 weeks ago. I have since received a Reaffirmation Agreement from my car lender. I was told by my attorney that it is Arizona state law to reaffirm our vehicle. But I plan to trade my vehicle in right after discharge so should I not reaffirm it?

The way I see it is if I do not reaffirm, then I am not responsible for it anymore. Although, I am current on it and have never missed a payment. I want to trade it in for a new more fuel efficient car so my main question is:

If I do not reaffirm, can they repossess it even if I am current? Also, if I do not reaffirm, can I trade it in at the dealer for a new car? BTW, I owe $11,000 on it and my car is worth $9,000 for trade in value.

[jsofaz]

I am in Arizona. I can only tell you my experience. We were discharged July 2010. We have a vehicle financed through GMAC. We did NOT reaffirm. I mail them my payment each month. We haven't had any problems with this. I have no idea about trading your car in though. But, if you can trade it in and plan to do so right after discharge, I wouldn't reaffirm. Just my two cents. Oh yeah, I just remembered. My mother filed Chapter 7 last year. She traded in her car for a used one. She didn't have any problems doing so. Mighty high interest rate though. Also in Arizona.

[tcreegan]

Hi blueeyz,

I was told by my attorney that it is Arizona state law to reaffirm our vehicle. ....not sure why so many attorneys are fairly clueless on this issue. Reaffirming in a BK is federal BK law, not state law. And it is never required, always voluntary, and can be rescinded up to 60 days after the fact.

If you don't reaffirm, it is up to the lender what they want to do. If the payments keep rolling in, they probably won't flinch. If they get a burr under the saddle, they repossess. But if you are talking to them and staying current you can probably talk them out of it.

If you are going to trade the vehicle in...not reaffirmed means the lender needs to get paid b4 they release the lien/title needed for the sale.
Reaffirmed, same deal, but depending on how the reaffirmation is worded, watch out for getting on the hook for a deficiency.

Well, hope some of this helps,

Tom in Colo

[blueeyz]

Thanks guys. I am leaning towards not reaffirming since I would like to trade i my vehicle shortly after discharge.

[despritfreya]

DO NOT TRADE IN THE UPSIDE DOWN VEHICLE. If you do, what do you think the dealership is going to do? It will give you some ridiculously low "credit" and then tack on the balance owed on the trade-in to the new vehicle thus you will pay for a debt that you discharged. If you are walking from the vehicle do just that. Do not sign the reaff and, when the time comes, surrender it to the lien holder. Save up some cash for your down payment.

Des.

[jsofaz]

This is really good advice from Des. Since he (or she) mentioned it, I realize I was wrong about my mom. She did as suggested above. She let the car go back to the lien holder, then purchased another car. It was not a trade-in. You will probably have a high interest rate either way. But you don't want that old loan tacked on to the new one. Let it go. Then buy a car without a trade-in.