Reaffirmation Dilemma :/

[pennymeg]

Hi everyone - I have a reaffirmation dilemma that I'm struggling with and maybe some of you can provide some insight/advice?

I have two cars:

Car #1 - I always planned to reaffirm this loan, as it is a fairly new car with low mileage and I have approximately $5,000+ of equity in the car. The Federal Exemptions (auto exemption and wildcard exemptions) more than covered my car. I indicated my intent to reaffirm the loan on my Statement of Intention, the reaffirmation agreement has been filed with the court and I am awaiting the hearing (I filed pro-se).

Car #2 - I planned to surrender this car. I originally owned the car free and clear but used it as collateral for a personal loan with OneMain / CitiFinancial a few years ago. The balance of the personal loan is approximately $7,500. The NADA value of the car is approximately $4,000. Because I planned to surrender the car, I did not list it as exempt. I indicated my intent to surrender the car on my Statement of Intention.

My 341 meeting was on 9/18 and the trustee has entered the Statement of No Distribution.

A few days ago, I received a reaffirmation agreement from OneMain, proposing new terms - lowering the balance to repay to $1,000 - payable in 10 monthly installments of $100 each - 0% interest. Their reaffirmation paperwork listed the market value of the car at just over $1,000.

Now, I am considering keeping both cars but I don't want to create any additional problems for myself.

Would I be creating a problem because I didn't list Car #2 as exempt?
Would I have to amend the schedules pertaining to this?
Would this create a problem with the trustee?

I'm not quite sure where I should go from here and I know I need to figure it out asap.

Any insight?

Thank you!!!

[malf1204]

NADA is not the "fair market value of the car". That value is the amount that the market will bear for your car and it sounds like your lender thinks it is $1000.00. I would file a motion to redeem for $1000.00 and be done with it. The loan will be discharged and the car will be yours. I would not reaffirm a loan. You should not have to worry about an exemption because you are using post-petition funds to redeem the car. Anyone else correct me if I am wrong.

[justbroke]

A motion to redeem could be a more interesting way to get the car for $1,000, but your attorney may charge you for the motion and any hearing. It may be better to just reaffirm since it's $1,000 at 0% for 10 months. If you redeem you'd need to bring your own financing or pay it outright, and your motion should specify how you intend to pay for the redemption price.

I see the only problem is if the Trustee thought it was worth more, but the lender itself thinks it's only worth $1,000. If that fits within your leftover exemptions, I don't see any issue. A more cautious attorney (pro se) might update the schedules (Schedule B, and Schedule D) to show the new values.

I can't tell you what the Trustee would do, but so what? If you weren't going to keep it anyhow... no problem for you. But, if you get the car for $1K at 0% for 10 months... it could be worth it. It's a financial decision at this point. Remember, the added costs of taxes, registration fees, maintenance, insurance, etc, when maintaining a second vehicle.

[pennymeg]

Thank you both for your replies - they were both very helpful. I think I will sleep on it for another day or two and then make a final decision. I believe there is room left for exempting the NADA or the fair market value (according to the lender).
I think I'm just worried about what the worst case scenario could be and if I'd possibly jeopardize the reaffirmation agreement for my first car which I 100% want to reaffirm and keep.

[malf1204]

Well if you owe $1000 and it is worth $1000 there is nothing to exempt. The exemption would be for equity and you have none.

[pennymeg]

Thanks Malf1204 - that makes perfect sense and didn't even occur to me until your post. Thank you

[justbroke]

Nothing to exempt, but the procedural question would be, if you put $4,000 on the schedules, but it's really $1,000... do you need to amend. Probably not, but it's still a great question.

While you are not in Virginia, let me just relay this. There was a case where a debtor claimed that the value was some amount, let's just say $4,000, on the schedules (Scheduled it as $4,000 on Schedule B). They then tried to redeem for $2,000. The court stepped in and found that the amount stated on the Schedules is an admission of the value at the time of filing. The debtors were stuck with that amount.

So, that's why I'm asking if this is still an issue with adjusting the schedules. The question is still on the value, and the admission of the value on the Schedules could be the problem. The question: did the debtor just receive a windfall?

Edited To add: this really could just differ based on your District. In my District in Florida, the valuation is based on the day of the redemption hearing and not on the filing date. In some States/Divisions, the valuation is at the time of filing. In Florida, if the redemption value was $1,000 then that would be the value at the hearing so you would not need to amend.

But that's just me thinking out loud... because it's a great procedural question!

[bcss]

Couldn't you just make a correction to your schedules? I would think the option of the lender as to the value of the car would be better than the value you came up with.

[malf1204]

While you are not in Virginia, let me just relay this. There was a case where a debtor claimed that the value was some amount, let's just say $4,000, on the schedules (Scheduled it as $4,000 on Schedule B). They then tried to redeem for $2,000. The court stepped in and found that the amount stated on the Schedules is an admission of the value at the time of filing. The debtors were stuck with that amount.

So, that's why I'm asking if this is still an issue with adjusting the schedules. The question is still on the value, and the admission of the value on the Schedules could be the problem. The question: did the debtor just receive a windfall?

SO does that mean if you mistakenly listed the value of your car as $100,000 instead of $10,000 you are stuck with the value at $100,000? I think the value of the car is the value of the car not what you list on your schedule. I infact listed a higher value on my schedule than the eventual redemption not a word was said.

[justbroke]

SO does that mean if you mistakenly listed the value of your car as $100,000 instead of $10,000 you are stuck with the value at $100,000? I think the value of the car is the value of the car not what you list on your schedule. I infact listed a higher value on my schedule than the eventual redemption not a word was said.

For redemptions it probably doesn't matter because in some Districts the value is the value at the hearing on the redemption motion. However, I read at least one case where the debtor was literally "stuck" with the value that they listed on the Schedules. I know that I had a higher value on my schedules than I redeemed one of my vehicles, but Florida uses the value on the date of the hearing. I did not need to amend.

It was solely a procedural question on whether the Schedules needed to be amended in that particular State/District.