New car with Roadloans right before filing for ch 7 - pro per se

[michelle1181]

Hi all, this is my first post and I am definitely worried and confused.

I just obtained a new car with Roadloans (Santander) 3 weeks ago with less than desirable interest rate but decided I will take what I can get because I need a car to get to work, etc.

I am in the process of filing for chapter 7 without an attorney because I simply cannot afford one and just have a question regarding reaffirming a car. Does anyone know if Santander aka Roadloans allows reaffirmations on ch7 bankrupties? I am 100% confident that I will be current on payments. I am afraid that there is some weird clause with roadloans or santander regarding reaffirmations on vehicles on pro per se bk petitions. I am using a document preparer to help me with my papers and not an attorney.

Any help is greatly appreciated. Thank you.

[sillywalks]

Hi all, this is my first post and I am definitely worried and confused.

I just obtained a new car with Roadloans (Santander) 3 weeks ago with less than desirable interest rate but decided I will take what I can get because I need a car to get to work, etc.

I am in the process of filing for chapter 7 without an attorney because I simply cannot afford one and just have a question regarding reaffirming a car. Does anyone know if Santander aka Roadloans allows reaffirmations on ch7 bankrupties? I am 100% confident that I will be current on payments. I am afraid that there is some weird clause with roadloans or santander regarding reaffirmations on vehicles on pro per se bk petitions. I am using a document preparer to help me with my papers and not an attorney.

Any help is greatly appreciated. Thank you.

Hi and welcome from another relative newbie! I could be wrong, but I'm pretty sure about this -- if you are current on your payments, whether a company 'allows' reaffirmations or not is really not an issue. Although a company technically COULD choose to repossess your car, my understanding is that it is unlikely as long as you stay current. I know that is true for a house, and it maybe someone will chime in if things are different for cars.

Hope all goes well in your Chapter 7!

[justbroke]

Yes, Santander does reaffirm car loans. There is mixed caselaw on whether a lender can repossess for simply not reaffirming (yet being current on payments).

[michelle1181]

Thank you for your replies -- can you expand on your comment regarding the mixed caselaw?

[justbroke]

Thank you for your replies -- can you expand on your comment regarding the mixed caselaw?

There were major changes to the Bankruptcy laws in 2005. These changes are affectionately called the BAPCPA (Bankruptcy Abuse and Prevention Consumer Protection Act). We make fun of it because it "protects the consumer" yet was written by the financial services industry! I digress.

So, these BAPCPA changes made it mandatory that a debtor must choose to either redeem, reaffirm or surrender personal property in a case filed after October 2005 (when the BAPCPA became affective). That is, purchase it from the creditor at fair market value (redeem), sign an agreement to keep the terms and vehicle and not discharge the debt (reaffirm), or give the property back (surrender). For years, before this was passed, there was a phantom "fourth" option known as the ride-through (also known as stay and pay).

Well, many of the major auto lenders (like Ford Motor Credit and Honda Financial) have taken the BAPCPA to heart and are forcing the debtors to choose one of the three options, and not the fourth (phantom) option. Also, credit unions and small community banks are notorious for also forcing the issue.

How this relates to caselaw? Some Districts have opined that if you choose to reaffirm, but the reaffirmation is denied by the court as a hardship (which is usually the case), the lender still cannot repossess the property so long as you pay! Other Districts say that if you don't actually reaffirm, then the lender is not barred from repossessing the property, even if you have paid on-time since the purchase and you are not in default!

So, it differs by District. If you are with Ford or a Credit Union, I'd evaluate whether to reaffirm or not. Almost no judge will allow you to reaffirm a vehicle where you owe more than its worth, unless you have a great interest rate and it's not a hardship. (Noting that there are many judges which think, and rule, that any reaffirmation is a hardship on the debtor, and summarily deny all reaffirmations.)

[michelle1181]

Thank you -- definitely a big help.

Here is my issue - I just got a new (used) car, previously didn't have one before and was relying on public transportation to get to work, however due to the fact that I have a 4 year old son and commute far, it was essential for me to get a car. I was able to get approved through roadloans for a loan for 10,500 with $1,875 down payment. I was able to withdraw the money for the downpayment through my 401k and now I am the owner of a 2006 Nissan Sentra with only 32k miles and what a relief!!

The loan itself is not very favorable, 24.99% interest rate, so basically the car is worth $11k and the loan is $20k. I was planning on refinancing in a year and am 100% sure I will be current on all payments. Given all this info and the fact that I need this car to get to work and make money, etc, will the judge allow me to reaffirm or keep? Or will he/she decide that the interest rate is too high on the loan and deny the reaffirmation? I just really don't want to lose my car.

Any help or advice is greatly appreciated. Thank you.

[justbroke]

It depends. That interest rate is very bad, and most judges wouldn't approve the reaffirmation just because that interest rate is way high! As part of a reaffirmation, you could try to adjust the rate down below 10%. I don't know if that would be possible or not, but I'm unsure of a 24% interest rate. Seems almost predatory.

[corrin69]

There were major changes to the Bankruptcy laws in 2005. These changes are affectionately called the BAPCPA (Bankruptcy Abuse and Prevention Consumer Protection Act). We make fun of it because it "protects the consumer" yet was written by the financial services industry! I digress.

So, these BAPCPA changes made it mandatory that a debtor must choose to either redeem, reaffirm or surrender personal property in a case filed after October 2005 (when the BAPCPA became affective). That is, purchase it from the creditor at fair market value (redeem), sign an agreement to keep the terms and vehicle and not discharge the debt (reaffirm), or give the property back (surrender). For years, before this was passed, there was a phantom "fourth" option known as the ride-through (also known as stay and pay).

Well, many of the major auto lenders (like Ford Motor Credit and Honda Financial) have taken the BAPCPA to heart and are forcing the debtors to choose one of the three options, and not the fourth (phantom) option. Also, credit unions and small community banks are notorious for also forcing the issue.

How this relates to caselaw? Some Districts have opined that if you choose to reaffirm, but the reaffirmation is denied by the court as a hardship (which is usually the case), the lender still cannot repossess the property so long as you pay! Other Districts say that if you don't actually reaffirm, then the lender is not barred from repossessing the property, even if you have paid on-time since the purchase and you are not in default!

So, it differs by District. If you are with Ford or a Credit Union, I'd evaluate whether to reaffirm or not. Almost no judge will allow you to reaffirm a vehicle where you owe more than its worth, unless you have a great interest rate and it's not a hardship. (Noting that there are many judges which think, and rule, that any reaffirmation is a hardship on the debtor, and summarily deny all reaffirmations.)

"Stay and pay" and now a hardship denial make no sense to me. If there is no reaffirmation agreement in place, what protects the creditor? You could drop the insurance and have an accident or run the car into the ground through neglect and the creditor would have no recourse against you.

[justbroke]

"Stay and pay" and now a hardship denial make no sense to me. If there is no reaffirmation agreement in place, what protects the creditor? You could drop the insurance and have an accident or run the car into the ground through neglect and the creditor would have no recourse against you.

Nothing protects the creditor and this is exactly why some of the major creditors (like Ford Motor Credit), require a reaffirmation or they will repossess.

[IamOld]

There were major changes to the Bankruptcy laws in 2005. These changes are affectionately called the BAPCPA (Bankruptcy Abuse and Prevention Consumer Protection Act). We make fun of it because it "protects the consumer" yet was written by the financial services industry! I digress.

So, these BAPCPA changes made it mandatory that a debtor must choose to either redeem, reaffirm or surrender personal property in a case filed after October 2005 (when the BAPCPA became affective). That is, purchase it from the creditor at fair market value (redeem), sign an agreement to keep the terms and vehicle and not discharge the debt (reaffirm), or give the property back (surrender). For years, before this was passed, there was a phantom "fourth" option known as the ride-through (also known as stay and pay).

Well, many of the major auto lenders (like Ford Motor Credit and Honda Financial) have taken the BAPCPA to heart and are forcing the debtors to choose one of the three options, and not the fourth (phantom) option. Also, credit unions and small community banks are notorious for also forcing the issue.

How this relates to caselaw? Some Districts have opined that if you choose to reaffirm, but the reaffirmation is denied by the court as a hardship (which is usually the case), the lender still cannot repossess the property so long as you pay! Other Districts say that if you don't actually reaffirm, then the lender is not barred from repossessing the property, even if you have paid on-time since the purchase and you are not in default!

So, it differs by District. If you are with Ford or a Credit Union, I'd evaluate whether to reaffirm or not. Almost no judge will allow you to reaffirm a vehicle where you owe more than its worth, unless you have a great interest rate and it's not a hardship. (Noting that there are many judges which think, and rule, that any reaffirmation is a hardship on the debtor, and summarily deny all reaffirmations.)

Ok jusbroke thank you for your guidance - here is the thing - both my spouses and my care are worth less than the loan (kind of by definition) BUT no car=no getting to work - where I live there is NO ZERO NONE public transportation - so if the judge/court won't allow reaffirm and if Chase and Capital One respectively take our cars even though we're paying...how does that make sense???? BY the way car #1 int rate is 12% car 2 I think...is 11%

What about mortgage? I had it modified last year when I was unemployed, and rate now is 5.25% If court denies reaffirmation for a mort loan that is LESS THAN any rentals in the area, how does that make sense???

[justbroke]

so if the judge/court won't allow reaffirm and if Chase and Capital One respectively take our cars even though we're paying...how does that make sense???? BY the way car #1 int rate is 12% car 2 I think...is 11%

I believe neither Chase nor CapOne behave like Ford and will probably let you "ride through". The interest rates are really not that bad. I'm usually thinking predatory rates in the high teens and lower twenties (16% to 25%).

What about mortgage? I had it modified last year when I was unemployed, and rate now is 5.25% If court denies reaffirmation for a mort loan that is LESS THAN any rentals in the area, how does that make sense???

You can usually stay and pay. I would not reaffirm a mortgage especially in a non-recourse state. Reaffirming a mortgage is almost always a very bad idea. There is (usually) absolutely no reason to reaffirm a mortgage.

Since you have been unemployed in the past, you definitely don't want to be unemployed again, not be able to afford the home, and then fall subject to collections on a potential deficiency upon foreclosure! This is why reaffirmations are a bad idea. We can't predict the future; because if we could, I'm sure many of us wouldn't be on BKforum posting about how bad the economy turned out to be.

[IamOld]

a TRILLION thanks JUSTBROKE (actually my atty charges you an extra $100 if you have a car loan with Ford, Honda, etc.) atty said Cap One and Chase are no problem.

Sadly my state hates its own citizens (VERY much recourse state - after you're delinquent 2 to 3 months with the mort, you can be foreclosed w/in 60 days!!!)- I moved here with the spouse 20 years ago (for a job) and I wish we would have settled elsewhere!!!

[justbroke]

You are welcome IamOld. Did you talk to your attorney today or over the weekend? I'm glad that you appear to be feeling better about all this now!

[jetsfan2010]

Thank you -- definitely a big help.

Here is my issue - I just got a new (used) car, previously didn't have one before and was relying on public transportation to get to work, however due to the fact that I have a 4 year old son and commute far, it was essential for me to get a car. I was able to get approved through roadloans for a loan for 10,500 with $1,875 down payment. I was able to withdraw the money for the downpayment through my 401k and now I am the owner of a 2006 Nissan Sentra with only 32k miles and what a relief!!

The loan itself is not very favorable, 24.99% interest rate, so basically the car is worth $11k and the loan is $20k. I was planning on refinancing in a year and am 100% sure I will be current on all payments. Given all this info and the fact that I need this car to get to work and make money, etc, will the judge allow me to reaffirm or keep? Or will he/she decide that the interest rate is too high on the loan and deny the reaffirmation? I just really don't want to lose my car.

Any help or advice is greatly appreciated. Thank you.

Hate to burst your bubble Michelle, but even if you are current on all your payments after a year, the fact that you owe approx 20k(maybe 18k) after a year, and the car will only be valued at 10k by that time, you will be well over the value allowable limits to refi. What most banks/credit unions dont tell you is the most you can be upside down is 120-130 percent of the value of the vehicle. That is why its so tough to refi a non-luxury car(they retain their value much better).