Reaffirm a car???? Question . .

[clevelandmom]

Hi Everyone,

Background: Filed Ch. 7 this passed Monday WITH presumption of abuse - but special circumstances. DH is laid off as of this past Aug., and we were $135.00 over passing Means Test this month - but I was about to be garnished so we HAD to file this month. Good thing too as I found out yesterday they were about to hit me with $375 every other week - OUCH! I bet the law firm that sued me is pretty mad though. My company already had written a check to them and had to tear it up and give the money back to me because I filed just in time. LOL. . anyway. . .

We will easily pass Means Test as of Dec. 1. We are keeping our house. We want to keep both cars. The problem is one of the cars is a Ford, it's only about 7 months old, and we are definitely upside down. Not 100% sure if Judge will allow us to reaffirm - so here is the question. DH OFTEN has to go out of town to find work - there is often no work in Cleveland. He NEEDS a good, reliable car to get him to and from. If we had to give this good car up (BTW, the payments are high for a Ford - over $450/month, BUT, he has an insurance policy rolled into that payment for tires, roadside assistance, etc., because when he travels out of town he would like that covered), what are the chances that we could get a good, reliable car afterwards? I am hearing that Ford says you absolutely have to reaffirm - they are one of the only companies that will not allow a "ride through," but I am worried about him not having decent transportation. I have to go downtown every day to work, he has to go to God knows where when he actually IS working. Does anyone have experience with having to give up a car and purchase a new one after BK? If so, was it a decent car? I just don't see the point of him having to give up a car, only to get a klunker and then be forced to constantly have to dump money into it because the Judge said no to the perfectly good car he has now. Then you deal with the headaches of time off, and your employer gets mad, and the whole viscious cycle starts. BUT - if we COULD get a decent car afterwards, maybe just letting it go would be better for us? My understanding is a Judge will determine what is better for the debtor in this case. Are there better deals out there that WE, brand new bankruptcy filers, would be able to get? Any help would be appreciated. Thank you everyone!

[debee]

My understanding is that if your lawyer signs off on the reaffirmation agreement, you won't need a hearing. Has your lawyer indicated she/he won't sign?

[clevelandmom]

Hi Debee,

No, actually, my lawyer first tried to get us to redeem - but we didn't qualify. The person that he wanted us to go through said our mortgage was too high for the debt/income ratio. Go figure. But husband is on unemployment, and that eventually will change. Also, we have been able to keep our bills paid (house, 2 cars, utilities, and a lot of mac and cheese for dinner), so we know how to cut corners. We definitely want to keep the car because dh NEEDS to keep looking for work, and God knows if we're going to have a hard time once the bk is over trying to find another car. I know the Judge will do what is in our best interest, but I just hope he sees that the most important thing is us having 2 cars - that work! Have you had experience trying to get a car after bk? Thank you for responding.

[debee]

When you say "no" I'm not sure if you mean he won't sign off, or you're just not sure. If your lawyer signs off on the reaffirmation, I don't think you'll need a hearing. Those are normally reserved for the cases where the lawyer won't sign off. So, if you're not sure you can call your lawyer tomorrow morning and ask him. He'll look at your schedule I/J and the bottom line there. If there isn't enough to pay the debt on the reaffirmation agreement, there is a presumption of "undue hardship" and judicial review is mandated. The reason I suggested asking your attorney specifically about the reaffirmation is you might be worrying for nothing. If he will sign off on it, you keep the Ford and don't have to think about a clunker leaving hubby on a gravel road who-knows-where.

I haven't had to buy a car post-bk, but other people on this forum have. I have seen the threads, but haven't read them closely as it wasn't info I needed. I think there might be stuff in the post-discharge area of the forum. I know I've seen names of lenders who will lend to people post-bk at higher rates, but you're not completely cut off.

[clevelandmom]

Ohhh, thank you Debee! I meant no, my lawyer did NOT indicate he would not sign off. You may be right, I could be worrying about nothing. During our meeting where we signed all the papers, he seemed pretty hell-bent on getting us to REDEEM the car. Then he pulled out a whole stack of "redemption" cards for a particular bank, made a call to a woman he apparently deals with a lot, and then we were to call her. I admit that dh and I felt like we were being sold something as far as the redemption goes. But then when dh called the next day, we found out we didn't qualify. I should call and ask him tomorrow to see what he says about it just signing the reaffirmation then. Our schedule J is -$800 - however, we've been keeping all the bills paid every month, and we know we can do it. We would definitely prefer to keep the car and not go through the headache of trying to find something else. Okay - another reason too - my family knows everything that is going on, but his family does not. We can't for the life of us think up a good story to tell his family about why on earth he doesn't have a car and/or why we went and bought a klunker. (sigh). . .such a quagmire. . . Thank you for your help!

[debee]

I have read cases where the debtor wants to reaffirm and indicates that choice on their "Statement of Intentions", then the finance company sends the reaffirmation papers and the debtor signs those and asks the lawyer to sign, the debtor further presents an argument to their lawyer about how they need reliable transportation and so on, but the lawyer won't sign off on it because of "undue hardship" , so it goes before the judge. The judge takes into consideration that the debtor did everything they could possibly do to keep that car - state their intention, sign reaffirmation, and try to convince the powers that be to let them keep it (within the proper time frames)- and still won't approve the agreement BUT then judge goes further and stipulates that the debtor can keep the car and the car finance cannot repo it unless the debtor defaults. To me, that is the ideal workout. You get the car but no risk of deficiency.

We have a clunker. A good argument for having one is you can get something that is mechanically sound, ugly as my Mom-in-law, but costs next to nothing. Our clunker is 2o years old and except for annual maintenance like tune-ups, it gives us no trouble. We're not nickel-and-dimed with it at all. So should you end up losing the Ford, you can argue a clunker to the family by saying you're adopting a new approach to financial management. You can also join a car club like AAA that has roadside assistance for those out of towners. Just other options so you know that whatever happens, there is a way through it.

[melissah34]

We reaffirmed our truck. Our lawyer signed it with undue hardship and we still had to have a reaffirmation hearing. I think it depends on your district. It was very simple. Judge just asked how we were going to pay for it and we said that we'd had an increase in income and he said okay approved. We are not upside down in it though and we only owe about $5000.

I was told by our lawyer (not great in the reaffirmation dept.) that even if the judge denied it that if we kept making payments they couldn't repo because we did our part. That could be true or not true. I think it has to do with state laws as well.

[clevelandmom]

Thanks for your response Melissah. Actually, I have heard that Ford is notorious for still taking the car back [I]even if[I] you attempt to reaffirm. It's really silly of Ford to be this way, actually, if you think of it from a business standpoint. Having just come out of a Ch. 7, and WANTING to reaffirm the car, they know darn well that my debt to income ratio is going to be better, and if I start missing payments, then they could get the car. It's a secured interest for heaven's sake. But my dh and I have been thinking about it, and the Ford he is in actually has high payments because he had to roll miles from his previous lease into it. So if we have to give up the car, that's fine, as long as we can purchase another one that is not a clunker and finance it, but I guess we'll wait and see what happens. DH is laid off but needs his car to try to find work.

[debee]

Anytime the "undue hardship" is present, unless the lender is a credit union, you go to a hearing. If your circumstances haven't changed and you have negative DMI, third party contributions work.

If you go to a hearing and the judge doesn't approve the agreement, unless she/he specifically says that the finance company cannot take it, the lender can repo the car.

The relevant code is 521(a)(b), 521 (d) and 362(h). The things you have to do are state that you intend to reaffirm and then file the reaffirmation agreement prior to discharge. If the reaffirmation agreement isn't filed by the 45th day (post-341) the automatic stay is lifted. At that point, they can take it back. (How they do that is governed by state law and the loan document)

[clevelandmom]

Debee,

What do you mean by third party contributions?

[debee]

A commitment by a third party to chip in on the household expenses. Like Mom or Dad, for instance, saying they will make the car payment if you run into trouble or until you get back on your feet, etc.

Of course every judge is different, but this particular example has been written about widely. I think it was even the example given in the Congressional record.

edit: I just checked the congressional record (V.151, Pt.4) and it refers to "additional sources of funds" without specifying that source. There is case law where agreements were approved with third party commitments.

[clevelandmom]

OH! I see what you're saying. Well, that sort of leads to my next big question. My dh is on unemployment, but his unemployment is neve known how long he will be on it. He was unemployed for 6 months last year (which really helped us get in this mess), but then he worked the first 7.5 months of this year. Now he is on unemployment again (probably for the rest of the year now), and we just don't know when he will go back. Sometimes he will go back for a week, or a month, or 6 months - it just depends on the job. That being said, our schedule J shows -$900 while he is on unemployment. Fortunately Mom and Dad HAVE helped us out with bills here and there until we get back up and running. When the Trustee drills us on our budget, are we able to say that Mom and Dad have helped with bills? The whole negative Schedule J thing REALLY confuses me because yes, I'm broke, but yes, I can still make ends meet with help. We won't get shot at, thrown in jail, forced out of our homes or get tortured with having to listen to 100 hours of Millie Vanilli or anything, will we? I'm really nervous about the meeting with the Trustee. I hope he's in a good mood that day. Thanks for your help!

[debee]

As far as the trustee goes, the standard advice is to just answer minimally - only answer the specific questions asked. Yes, no, I don't know. Don't elaborate. If your trustee is grouchy and lectures you, I would just say 'in one ear and out the other'. I mean, who cares what she/he thinks about anything that isn't directly related to her ability to dismiss your case. If your case is going to be dismissed there has to be a reason and poverty isn't one of them.

I think most people who have reported on their 341's haven't been lectured on their expenses even with negative DMI. The trustee seems most interested in expenses if she/he can question them in order to create some dmi that would then be available to pay creditors. Although as Melissah pointed out, her trustee was a bear.

I normally stay right out of the "to reaffirm or not to reaffirm" debate but if you guys really are that negative, and if his payment is that high, and if his employment is that unstable, you might want to give some long hard thought to whether reaffirming is the right thing for your family. Because if you do it and if you can't make that payment next year or the year after and they take the truck and sell it, they will come after you for the deficiency and there will be no way to get away. Might be something to think about.

[clevelandmom]

Thank you Debee. I know you are right. I do know that no matter what we will have another car payment (we will have to) but I'm sure we can get one lower than what we are in and we will be better off all the way around with a lower car payment, no matter how you chalk it up.
Thanks for the 411 about the Trustee too. I guess you're right - what can they really say? I put on my Schedule J what my actual expenses are - with my cell phone being high (I have a teenager), my medical expenses being quite low (dh's union covers a lot of that), our food is about average, and everything else is close to the norm I guess. Ooohhhh. . . I just realized I left my Sangra off the list. This has been so stressful that my wine is a necessity, not a luxury. LOL! I don't know what I would do without this forum either. You are all the best!

[debee]

lol@sangra. Some of the forum members went and sat in on 341 meetings prior to their own. They all reported that it really took the edge off. Did you check out the 341 section of the forum to read any of the advice and reports there?