Reaffirming a car loan

[Quiet]

Hi everyone! I am needing some advice. I am days from filing bankruptcy and I have a car, 2011 Hyundai sonata. It has 88,654 miles on it. I was trying to get another car before I filed but I'm having trouble with financing. I either have to have a co-signer or a down payment. My car is only worth 5,400 dollars and I owe 12,345. Almost 7,000 upside down in this loan. I bought the car in Feb 2013 at 15,001 at 18% interest.

I'm at a loss on what to do. I know I need to dump this car but I have no mode of transportation. My sister says I need to stick it out and keep it. I told her I would still have the same issue with trying to trade it being upside down after the bankruptcy. My lawyer states that I do have the option for the 722 redemption loan but that's a separate process that costs more. I did good to come up with the 1500 to pay for this bankruptcy. I can't afford any more fees. I'm not behind on my car payments but I'm confused on what to do. It's really not in my best interest to keep that car.. smh..

How easy is it to obtain a new car for being discharged? Or during proceedings?

[Drazil65]

Hi, I would advise against reaffirming especially with that kind of negative equity (did you know what the car was worth when you bought it at that price?). If you are days away from filing then I assume you have stopped paying all unsecure debt and that should free up significant monies to live on? I ask because you say you cannot afford anything else? You will be able to get another high interest car loan (you will probably be inundated with offers the minute you file) and as you are already paying a very high interest rate you will not lose anything there. Then get yourself a much cheaper vehicle that is at least worth closer to what you purchase it for.

If you are going to play the bankruptcy card you will need a plan for that fresh start after the discharge, do you have sufficient funds coming in? after you stop paying unsecured debt does it make a big difference in your life so that you can move forward and work on living within your means? can you start working on that emergency fund? can you stop using credit? These are all goals that should be in your thinking process and you should be working on those goals as you progress through the process. Good Luck!

[bcohen]

While a 722 redemption loan might come with a much higher interest rate, the monthly payments and the time frame to payoff the loan will necessarily be MUCH LESS than your current loan. The reason is because the new loan will be for the CURRENT value of the car, as determined by the court, and not for the outlandish sum which you owe now. The $7000 in negative equity will simply disappear if you obtain a redemption loan.

[LadyInTheRed]

A 722 redemption may well be worth the attorney fees because of the overall savings that bcohen points out. If you don't go that route, you very well may be able to get a car loan at a lower rate than you are currently paying after your discharge. If 18% was the best you could do 2 years ago, I'm guessing your credit report is a mess. It may actually improve after your discharge because you will have no debt. If worse comes to worse, you can buy a "beater" until you can afford something better. Whatever you do, do not reaffirm a loan that is that far under water. Hopefully, your attorney would not sign a declaration saying that it is not an undue hardship and a judge would not approve the reaffirmation anyway.