Reaffirming vechicle loan

[kellysmum]

Our date for our creditors' meeting has been set. In the meantime, we are receiving numerous advertisements from car dealerships, most of which say that even if we reaffirm the car, our payments will no longer be reported to the credit bureau. (I am not sure the trustee will let us reaffirm the car, given that we owe more than it's worth and we really can't afford it budget-wise.) Is it true that even if we do manage to reaffirm the car, the payments will no longer be reported? Also, if we cannot reaffirm the car, can we do like we are doing with our house and "stay and pay"?

[keepsmiling]

Reaffs are generally not recommended, especially on an underwater asset! Depending on who your lender is, you should be able to keep the car if you keep making payments. If it's Ford, they will probably repo.

[Floridagail]

True, a reaffirmed Car shows up as Included in bankruptcy. No positive credit.

I had this problem in 2009 , I reaffirmed my car never late, paid off later that year. It shows IIB. Negative item. I disputed it, I was angry. I called GMAC they did not care as I had paid them off. Finally all 3 credit agencies removed totally from report. of course then the car died.

[clunk]

Actually....we were just discharged back in January and all three of our reaffirmed vehicles are showing up as current on payments and mention nothing about the bk...

[ace300s]

We got a great deal from Citi on our reaffirmed card. They reduced balance owed to below blue book and gave us zero interest....

They do report to the balance and monthly payments to all three credit bureaus.....

[ccmisery]

If it's Ford Credit, you have to reaffirm the loan, a few others are noted for doing repo if you don't, Mazda is another I know of.

I was told there is a loophole to get out of this, if you sign it but your attorney doesn't, you can still go to court yourself (attorney may not want to be involved) to get it approved then if trustee rejects it, they can't repo it since you did your part. I have not verified this, but I have two Fords, both financed with Ford Credit, one with a year or so left on the lease and another that is a recent purchase that I financed.

From what I know, if you reaffirm the info goes on your credit report as positive since your reaffirming the debt and paying as agreed.

[bcohen]

If you "owe more than [the car] is worth" and "can't afford it budget-wise" then it seems like a no-brainer. Definitely don't reaffirm, and depending how far "underwater" the car is, you may want to quit paying, drive it for a couple months payment-free, and then let the bank repo it. They won't be able to report the repossession on your credit reports, so you will not have difficulty replacing the car after your bankruptcy is finished.

[btbeme]

Please explain why you feel it is important to reaffirm a vehicle you cannot afford and owe more than it is worth. Or why it is even a remote consideration.

[mknolan]

This is the info I got from my attorney...
If you are making payments on a car or truck and you want to keep these assets, you are required by Section 521(a)(6) of the U.S. Bankruptcy Code to sign a reaffirmation agreement. A reaffirmation agreement is a legal document stating that you will continue to make payments on the asset after your bankruptcy is complete. If you want to keep a car or truck and fail to sign and file a reaffirmation agreement with the court before your bankruptcy is discharged, the creditor has the right to repossess the vehicle.

[bcohen]

Although the creditor may have the "right" to repossess simply because you don't reaffirm, most won't, because it doesn't make good business sense to take back an asset that is worth less than the outstanding loan balance when the deficiency is uncollectable due to BK. Some lenders, such as Ford Credit do this as a matter of policy, in order to coerce people into reaffirming. Generally speaking, it is NEVER in your best interest to reaffirm anything, unless you owe significantly LESS than what the asset is worth.

In this case, I recommend either doing a "stay and pay" or simply quit paying, drive the car for a couple months until it is repossessed, and then buy another one. Definitely don't reaffirm!

[LadyInTheRed]

This is the info I got from my attorney...
If you are making payments on a car or truck and you want to keep these assets, you are required by Section 521(a)(6) of the U.S. Bankruptcy Code to sign a reaffirmation agreement. A reaffirmation agreement is a legal document stating that you will continue to make payments on the asset after your bankruptcy is complete. If you want to keep a car or truck and fail to sign and file a reaffirmation agreement with the court before your bankruptcy is discharged, the creditor has the right to repossess the vehicle.

While that may be an accurate summary of what the bankruptcy code says, people file Chap 7 and keep their cars without reaffirming all the time. Not all lenders exercise the right to repossess if you continue to make timely payments.

[ccmisery]

Please explain why you feel it is important to reaffirm a vehicle you cannot afford and owe more than it is worth. Or why it is even a remote consideration.

If you need a car to get to work, and will not have the funds to by a new one (odds are you won't have the money) and cannot qualify for a replacement than reaffirming is the only option. I also see no point in getting a car post bankruptcy and paying 18 to 25% interest or signing up for a 6 year loan. I know a guy who filed years back, he bought a gas guzzling used car and got a 6 year loan on it with high APR.

By reaffirming you are signing away your rights to write off the car in the event of a job loss or other financial ruin post bankruptcy. That means they can repo it and then sue you for the difference and nothing in the bankruptcy code will protect you.

For me having a car is a necessity to get to work, if they take that away from me then they can forget getting any repayment in a 13 for example. I could probably afford a motorcycle or moped at best, but it would be several months before I could save up enough funds to get a high mileage used car and then even at that point it could not be financed.

[ccmisery]

Although the creditor may have the "right" to repossess simply because you don't reaffirm, most won't, because it doesn't make good business sense to take back an asset that is worth less than the outstanding loan balance when the deficiency is uncollectable due to BK. Some lenders, such as Ford Credit do this as a matter of policy, in order to coerce people into reaffirming. Generally speaking, it is NEVER in your best interest to reaffirm anything, unless you owe significantly LESS than what the asset is worth.

In this case, I recommend either doing a "stay and pay" or simply quit paying, drive the car for a couple months until it is repossessed, and then buy another one. Definitely don't reaffirm!

If you can't pay for another car with cash, and are left with 18 to 25% APR financing and 6 years of payments then you will be filing bankruptcy again in a few years.

I do not see the simplicity in buying another car, if you have that much cash in your savings account, the Trustee will have the right to take it in some instances. Falling victim to one of those shady "bad credit/bankruptcy" car dealers who will be glad to give you a loan you cannot afford is a recipe for disaster in some instances, depends on your scenario. Car has excessive high mileage for the model year or mechanical issues or you can't afford the payments, then it's probably a no brainer. Also getting a new car loan raises your expenses, why give the $300-496/month to the creditors when you can put it into reliable transportation?

[mknolan]

I plan to reaffirm my car loan. I have no desire to go thru a possible repossession and the thought of car shopping gives me severe heartburn!! :-) I have a reliable car that gets me from point A to point B. Filing Bk for me was a necessity, like most of us on this forum I made stupid financial decisions with regard to credit card debt. Once off the "hamster wheel" and having taken the Financial Management course I have a new outlook when it comes to frivolous spending. I have a "Need" and "Want" list...when I think I simply "can't live without it" I put it on the "Need" list, think about it or "sleep on it" and 99% of the time it ultimately ends up on the "Want" list or gone forever!! I look forward to a fresh start going forward!! My 341 is this week Wednesday...fingers crossed that all goes well and I am able to join the 60 Day Club!! Wish me luck!!

[TBA]

We reaffirmed a vehicle. We did it because we had equity in it, the payment was affordable, and i was having a baby and needed a car.

If i was upside down, i would have let that puppy go in a heart beat though. Cars are depreciable assets. You will never go rightside up once you are upside down. Just my two cents.