To reaffirm or not to reaffirm. that is the question..

[gacreditguy]

I have an auto loan that I am considering reaffirming.. I currently owe $14500 on the car and they sent a reaffirmation at the current rate of 7.99%, as per the old agreement.

I checked today and the car is worth (at best) $10,000 retail and less than that at trade-in rates.

Wondering what I should do here... My attorney did let me know that IF I decide not to reaffirm it, I should be prepared to surrender the car. I owe more than it is worth and upside down probably $5k or more in a trade in situation.

I guess my questions are;
1- Should I reaffirm? What would you do?
2- Is a reaffirmation agreement required on an auto in GA?
3- If I do NOT reaffirm do I loose all of my rights? (example, late one day and they come and get it?)

Any advise or personal experiences you can offer is appreciated..

[poorme]

You have some options.

1. If you do not reaffirm, you can (with lender's agreement) enter into a 'retain and pay agree,emt. Basically, if you are current and keep making payments they let you keep the car.
2. Reaffirm. Then after discharge, get a refi to lower your payment and work out a trade in to your better advantage.
3. Get a 722 redemption loan, which pays the lender about what the trade-in value is...and you own the car with a new note to the redemption lender.

Here's the deal. If you default or don't do anything, they will eventually repo the car and sell it a a loss to themselves. Reaffirmation is good for those who are current, WANT to keep the car, and aren't upside down. If you reaffirm and later on default, they can come after you for the loan difference.

[DisneyGirl]

We did both. We reaffirmed our car and just paid it off in February. We did the redemption loan on our minivan b/c we owed far more than it was worth. At the time of our BK we owed $14000. With the redemption loan it went down to just $4000 (roughly). It'll now be paid off in 9 months. However we were always current on our car/van payments before, during, and now after BK. So if you've been current and want to keep it, I'd do the redemption loan so you can get the lower monthly payments. Also the new loan reports as a positive on your credit report!

Good luck!

[gacreditguy]

does a redemption loan have a lot higher interest rate? where do I get one?

[DisneyGirl]

Our atty handled ours. We didn't have to do anything but sign the new loan. As for your other question, sadly, yes the interest rate is much higher. Even with the higher rate our payments dropped over $150/month and our new loan was 2 years shorter! So it still worked out WAY better than reaffirming it.

[USPSA-Shooter]

You have some options.

1. If you do not reaffirm, you can (with lender's agreement) enter into a 'retain and pay agree,emt. Basically, if you are current and keep making payments they let you keep the car.
2. Reaffirm. Then after discharge, get a refi to lower your payment and work out a trade in to your better advantage.
3. Get a 722 redemption loan, which pays the lender about what the trade-in value is...and you own the car with a new note to the redemption lender.

Here's the deal. If you default or don't do anything, they will eventually repo the car and sell it a a loss to themselves. Reaffirmation is good for those who are current, WANT to keep the car, and aren't upside down. If you reaffirm and later on default, they can come after you for the loan difference.

I "THINK", but am not sure, that the new law ended the "ride through". Meaning that you have to reaffirm or surrender the vehicle.

We filed under the old laws, we had the options you described. We chose to reaffirm a lease. The TL and the fact that we'd have two years to build credit before we needed to get another car made it worth it to us.

[LostOne0069]

We plan to reaffirm our '04 Yukon XL Denali because we have 4 kids and we'd just have to buy it, or something just like it, back again. This is also the only vehicle we own.

Our current loan is at 5.45% interest and has 4 years left on it. with about $38k owing and current trade in value at about $32k and retail at $40k.

If we got rid of this we'd end up paying probably about the same payments for something that's not as good and not under warranty.

[SinkingFast]

I'd say a lot depends on the age/overall condition/mileage of the vehicle and where you are in the note.

If the car is 3-4 years old, you're not gonna see huge depreciation in value from here on like you do one year to the next on newer cars.

If you're over a year to 18 months into the note, you'll begin to see fair amortization on the loan from each payment as well. Most of the first year or so of payments is practically interest every month. Car loans, the interest is paid on the front end while principal is paid more toward the end of the term.

So, if you're in a spot where your car is gonna hold it's value fairly well, AND you have gotten to the point in the note where each payment amortizes a chunk every month, reaffirm may be a good idea.

If you reaffirm, also, you get the added benefit of carrying a known Creditor who will report on your credit history with you thru BK.

[poorme]

Here's a couple of links to redemption loan companies. Of course, this is by NO means inferring one is better than the other or an endorsement.

http://www.722redemption.com/

http://www.freshstartloans.com/fslc/home.asp

They will require your bk attorney to get court's approval for the loan, but since it's usually in your interest to do so, it shouldn't be a problem. I was anticipating a 20% loan, but they offered me a 9.5% deal. Still, by financing less than the payoff, the payment went down.

[macahs]

I had a quick question since I've never heard of this before.

On their site (the 722redemption.com one) it says you can finance your vehicle at FMV yet I've read you finance it at trade in.

Which would it be?

Thanks!

[krobin02]

I "THINK", but am not sure, that the new law ended the "ride through". Meaning that you have to reaffirm or surrender the vehicle.

I filed under the new laws and it is basically up to the creditor and the state's precedent as to keeping it or not if you don't enter a reaffirmation agreement. I did not reaffirm and my creditor is letting me keep mine as long I stay 100% current.

[aa06a47]

If you're over a year to 18 months into the note, you'll begin to see fair amortization on the loan from each payment as well. Most of the first year or so of payments is practically interest every month. Car loans, the interest is paid on the front end while principal is paid more toward the end of the term.

I don't think that front loading interest is allowed / legal anymore. I know my first car loan, I paid all interest up front, then started working on the principle.

Of course, car loans are like house payments when they first start up......1000 in interest 100 in principle.