Question Scarey Reaffirment question

[JGra]

Hey everyone I'm new here and seeking help pretty scared what to do...

My wife and I had been planning to file bankruptcy for some time due to some circumstances in her past leaving her credit devastated and full of collections as well as mine having collections as well from being laid off in 2009 from recession.
We did finally file on Nov 10, 2010

Prior to filing, August 2010 (72 days prior to filing), we had to purchase a vehicle due to the state of our vehicles at the time. We had all intentions on keeping the vehicle through the bankruptcy process; however, through out the process I began to learn the ins and outs of what was going on and the reaffirmation process.

Well we are currently trying to decide whether or not to reaffirm our debt with our creditor for the vehicle and had a couple worries and questions:

1. Everything we have read as told us its a bad idea to reaffirm due to the balance and interest rate, but we do need a vehicle. I spoke to the creditor and they told us the option to keep the vehicle without reaffirmation as long as we make payments may be available. Is that legal? On the front of our reaffirmation agreement it states "Retain and pay is no longer an option under the current Bankruptcy Code." So that confuses me as to why they would say that, does that mean something other than what I am perceiving form it?

2. We made the debt 72 days prior to filing bankruptcy, can that be construed as credit fraud? We only purchased the vehicle because we needed a reliable vehicle and we had all intentions to pay it even after bankruptcy, but now due to the high balance (14,000+) and high interested rate (18.05%) we are paying an average of 10$ a month on principal...
It makes me feel like we would be better off letting them have it and trying to get a different vehicle from a buy here pay here or a different creditor once our credit has recovered slightly.
This is our main worry.

Our lawyer hasnt been much help at all on answering it, she pretty much just says "well those are options you gotta look at" well I'd like some advice haha

[nceguyfromne]

I agree, that is a tough question. "Retain and pay" is not in itself "illegal", but it is also not recognized or protected the Bankruptcy Code or the courts and you are therefore unprotected if you go down that path. For most banks, it makes no sense to repossess collateral on a loan that is being paid every month but unless you have a court-approved reaffirmation agreement in place, nothing would stop them from continuing to take your money for a while (a few months, even a few years) after you've filed bankruptcy and then repossessing it later on just for the heck of it. Once you file bankruptcy you are automatically in default on your loan, even if the payments remain current. You would have no recourse with the courts if the lender decided to take back the collateral. While this is not the typical outcome, it has happened.

As for whether or not you should reaffirm, that's tough for anyone to answer, especially not knowing the current market value of the vehicle and how essential it is to you. If you have other options for obtaining a vehicle that makes more financial sense, you should probably at least explore them. If your options are limited then maybe it makes sense to reaffirm. Sometimes a bad choice may be your only choice.

Here's another option you might want to consider. If you do go forward with reaffirmation and the bankruptcy judge denies it (because your DMI does not support it or you are too far underwater on the loan), you WOULD retain some protections because you and the lender signed the agreement in good faith and the court, through no fault of your own, denied the agreement. In that case, you have essentially entered into a "retain and pay" arrangement but without the financial ramifications if you default on your payments later on. I suggest Googling "back door ride through."

Hope everything works out for you!