reaffirm or not

[teddington]

I am getting ready to file for Chapter 7, I am reaffirming my mortgage and was going to reaffirm my vehicle but now I am wondering if that is such a good idea. I can make the payments no problem but its a 22k note with 11% interest and I found it has a horrible trade in value. I know I will be able to get a auto loan after the discharge but I am not sure it is worth keeping. Thanks in advance.
Tracy

[justbroke]

I always say to not reaffirm anything unless it's an absolute necessity that a.) the lender requires a reaffirmation (credit unions, Ford Motor Credit, etc), AND b.) you absolutely can't live without the property. Most people attach to property and think that it's "necessary" and "can't live without it", when in reality you can. I just ask people to not attach emotional attributes to property (I grew up here, it was my -- insert mother's, grandmother's, family's for centuries -- home, and/or the kids need to stay in this (insert "school", "neighborhood", "region", etc).

Have you considered a 722 Redemption? A 722 Redemption allows you to pay the "liquidation value" of the vehicle in the Chapter 7. So if it has a horrible trade-in value, the 722 Redemption could work. Please realize that a 722 Redemption loan will probably come with a 16-19% interest rate, but if your vehicle's value is half of $22K, the difference would still be astounding (especially if you can refinance 6 months after the Chapter 7 is discharged!). By the way, that's exactly what I did with a $23K note on an SUV. Crammed down to $11K and used 722 Redemption!

Unfortunately, not everyone qualifies for a 722 Redemption loan. The lenders are not "that" strict, but poor payment history for vehicles (prior to filing) will likely disqualify the person. It's still worth a shot. Here are two banks that deal with this type of loan. I applied for mine on the day I filed. After the lender filed their claim, I then filed a filed a Motion to Redeem Property.

US Bank: http://www.722redemption.com
Fresh Start Loans http://www.freshstartloans.com/

[LadyInTheRed]

Please look for the sticky (I believe in the Chap 7 forum) about why you should never reaffirm a mortgage.

[bcohen]

There is no reason to reaffirm a mortgage--no state allows a lender to refuse to accept payments and foreclose instead, simply because you have discharged the debt through bankruptcy. As long as you keep the payments current, the lender is required to accept them, and when you have paid the loan off you will own the house.

There is also no reason to reaffirm a car loan, unless the loan is close to being paid off, and you owe less than the car is worth. It sounds like you are "underwater" on your loan--you owe a lot more than the car is worth--which means that reaffirming would be a terrible idea.

[Boldilocks]

We had our 341 meeting today - THANK GOD for this forum because the BK software I used basically gave reaffirmation as the box to check if you wanted to keep the house, and I checked it. Then Wells Fargo sent the reaffirmation paperwork and I nearly soiled myself because it was rather in depth (read: incomprehensible).

Found these forums, read what a bad move reaffirmation would be, and decided against it. Yes, I had put it on the "intent" form - but you don't have to do it. The Trustee asked if we planned to keep the house - I said our intention was to "retain and pay" (got the phrase here: keeping paying mortgage, stay in the house), and nothing else was asked.

Incidentally, we were giving a BK info sheet as we all sat in the room before the hearings - we had to say that we had readi it at the swearing in. It said right there that reaffirmation will basically negate the bankruptcy in the event you default. I liked that it was so plainly put. Husband read it and looked at me and told me as I was genius - but I owe it all to you lot, LOL.