Should I reaffirm my car

[danrwe]

I have started the process of filing chapter 7. My attorney has the accounts, property lists etc.

I have a car loan that I got around April of this year. Because my credit was in bad shape the interest rate is outrageous. I am current on the loan and opted to reaffirm the debt because I need transportation and am concerned I won't be able to get a loan after BR.

Should I surrender the car or keep it?

[drowning123]

Do what works for you. You'll find some folks here either for or against reaffirmation. Though, reaffirmation is not necessarily a guarantee that the lender will allow you to keep the car. Good luck.

[AngelinaCat]

Some lenders will insist that you reaffirm; others are not as picky as long as you are able to pay the full amount by the date it is due. If you start falling behind then, you could be in trouble. Also, in many districts the reaffirmation papers go before a BK judge, and if that judge decides that reaffirming the loan would be an 'undue hardship' for you, then he/she is likely to deny the reaffirmation. That can be a GOOD thing, because the lender's demand for a reaffirmation was satisfied by the attempt, but when the judge rules against it, then it is out of their hands and you just keep making payments as normal.

With an "outrageous" interest rate, reaffirming could be harmful to you. If you choose not to reaffirm, then if you are later on down the line, not able to make the payments, and the car is repoed, then you are not responsible for the difference between the amount of the loan you signed for, and the amount that the car sells for at auction. If you reaffirm the loan, then you ARE responsible for the difference, and that reaffirmation, sets that amount outside of the bankruptcy.

You need to go over all of this with your attorney and get a thorough understanding of the process.

I hope this helps. Good luck!

[jetsfan2010]

Angelina pretty much gave you the pro and con of reaffirming.

[btbeme]

One other option - if you want to try, many car loans can be renegotiated as part of a reaffirmation. The loan company can agree to better terms for you, place those terms on the reaffirmation paperwork, and that becomes your new loan.

[AngelinaCatHub]

It has been a consensus here that you should not reaffirm. Reason is, you are BK already. If things get worse, you can bail and give the car back. The lender is not likely to wish to have your car. They want the money. Too many cars out there now due to the economy. You could get a 'beater' for about two payments on your new car.

I vote not to reaffirm. Check your lawyer's advice. 'Hub

[HighUnder]

If the OP files BK with the intention of keeping the car, and then after filing, decides to stop paying for a couple of months (or until it is repo'd) in order to save enough to buy another one...is the car expense still considered valid on the means test and schedule J? How would that work?

Basically, would it behoove a person in this situation to wait until AFTER filing to let go of the car, and how soon can that be done without throwing things out of whack? Assuming, of course, that the DMI would go up enough for it to matter...

[AngelinaCatHub]

If the OP files BK with the intention of keeping the car, and then after filing, decides to stop paying for a couple of months (or until it is repo'd) in order to save enough to buy another one...is the car expense still considered valid on the means test and schedule J? How would that work?

Basically, would it behoove a person in this situation to wait until AFTER filing to let go of the car, and how soon can that be done without throwing things out of whack? Assuming, of course, that the DMI would go up enough for it to matter...

Yes is the answer. That is stay current as the look back is six months. Once filed things can change. Best not to do much change till after 341 as you would be asked if anything changed. This is not a deceptive practice, just wise planning in your bk. If you cannot pay, that is the way it is. Stopping payment on what you know you cannot complete is wise in that you do not throw away good money after bad management of debt. Use that money to rebuild immediately and even before you are discharged. The time for the new start is when you realize you are bankrupted. Get on your toes and plan your recovery right on. One bit of warning, DO NOT attempt to hide current assets. You are dealing with Federal Court, not a small claims bit. They are kind unless you cross them. 'Hub

[danrwe]

I have decided not to reaffirm the car loan. I don't even know if it will last the term of the loan. I filed in late Aug. and my meeting is next week. Since filing, I have been receiving solicitations like crazy from local car dealers to get financing.
I am really reluctant to get into another car loan but also don't want to be tied down with repairs on a used car.
Thoughts???

[btbeme]

Best plan is to wait until after your 341 to stop payments. Save the $$$ normally slated for your payment for a down payment. Financing after a BK is usually precluded by higher interest rates and large down payments, so weigh out the cost of repairs against the true cost of a 20% down payment and financing at 22% or so. Do the math and see where you land.

You can always work with your current loan company to see if they can help you rather than repo. Sometimes it works.