Auto loans post BK..help please

[Anonymous]

I'm getting ready to make the long walk down the BK path and have a question concerning auto loans. I'm currently in one now that is nothing short of awful. 48 months at 20% interest calculated daily at 6.67 per day and was just started back 8/2014. The loan will be included in the BK but my question is how hard will it be to get another loan shortly out of BK and will the rate possibly be worse than what I'm paying? Just not sure if I should keep paying on this. Buying a car outright is not an option for me at this point.

[UncleB]

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@Anonymous wrote:
I'm getting ready to make the long walk down the BK path and have a question concerning auto loans. I'm currently in one now that is nothing short of awful. 48 months at 20% interest calculated daily at 6.67 per day and was just started back 8/2014. The loan will be included in the BK but my question is how hard will it be to get another loan shortly out of BK and will the rate possibly be worse than what I'm paying? Just not sure if I should keep paying on this. Buying a car outright is not an option for me at this point.

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When I BK7 in 2000, about six months later I found myself needing transportation.  I ended up getting a used car from a large GM/Chrysler dealership, with financing through Americredit.  The APR was either 20% or 21%, but it was calculated monthly, so it might have been slightly better than the loan you have now.  The good news is that after six months of paying on that loan (never late) I was able to get a new Mustang from a Ford dealership, with a cosigner, at 0% for 36 months. 

Basically you might get a lousy rate right away, but you'll be able to bounce back quickly.  The key for my progress (the Ford dealer told me) was that all my credit post-BK7 was perfect - both the car and the small credit card I got right afterward I had taken really good care of. 

Hang in there!

[Anonymous]

Getting a car loan shortly after BK7 isn't really an issue. I was getting offers for car loans even before my BK was discharged. But the interest rates would have probably been pretty bad. But in my case I was able to wait long enough to build up a little credit history, 2 Cap One cards and a newly issued Barclay card. My BK was discharged in Nov. of 2014 and I ended up needing a car in June of this year. So, about 7 months after discharge. I applied through Cap One and got a great rate for a new car purchase, only 4.5%. I ended up leasing instead. But I'm sure I could have gotten an even slightly better rate if I hadn't leased. 

[Anonymous]

Thanks for the info. The more I look at this loan, the more I realize I have to let this car go. 125000 on it with no warranty and three years left seems like a no brained. If I can get them to let me keep it without reaffirming I'll keep making payments until I can get into something else. I wonder how that would work on a trade in since no balance would be owed from the BK7?

[StartingOver10]

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@Anonymous wrote:
Thanks for the info. The more I look at this loan, the more I realize I have to let this car go. 125000 on it with no warranty and three years left seems like a no brained. If I can get them to let me keep it without reaffirming I'll keep making payments until I can get into something else. I wonder how that would work on a trade in since no balance would be owed from the BK7?

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You have a misunderstanding of the Bk process.

When you include the vehicle and you don't reaffirm, but you keep the vehicle it is called a ride through. Your discharge releases you from any personal liability of debt repayment so if and when you decide to turn the car back in, you aren't responsible for the balance. It does not mean that the balance goes away. It means you can return the collateral and not be responsible for the remaining balance.

However, the car is collateral for the lender and the lien remains on the vehicle. As long as you continue your timely payments, most lenders won't pick up the collateral. The lien for the note is still tied to the vehicle so in a trade the dealership would have to payoff the lien to get clear title to the vehicle. If you continue to pay on the loan you keep it. If you stop paying, they pick it up.

Given your description of the vehicle, it is most likely the dealership would say for you to return it to the lienholder and you just start fresh with the next vehicle.

[Anonymous]

I'm sorry, I misspoke. I know the original line holder has rights to the vehicle in case I chose not to pay. I was thinking from negotiating a buy out with the line holder to do a trade in with the vehicle. It was just a thought as they may just want to take that instead of me just turning the truck back to them. It's at the mileage most if not any will finance on a new purchase and wholesale will be well less than what the "note" is worth.

[StartingOver10]

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@Anonymous wrote:
I'm sorry, I misspoke. I know the original line holder has rights to the vehicle in case I chose not to pay. I was thinking from negotiating a buy out with the line holder to do a trade in with the vehicle. It was just a thought as they may just want to take that instead of me just turning the truck back to them. It's at the mileage most if not any will finance on a new purchase and wholesale will be well less than what the "note" is worth.

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If you aren't discharged from your Bk yet, you can do this inside the Bk. I did with one of my vehicles. I reaffirmed it but changed the terms - changed the interest rate and remaining term and specified when the title would be released to me (10 days after payoff). You have more clout to do this in the Bk then outside the Bk IMO.

If the lienholder doesn't agree, then don't reaffirm. It has to be in writing on the reaffirmation and signed by everyone and filed with the courts to mean anything. Otherwise, just do the ride through like you mentioned. You can turn it in with no negative effect to your credit when you are able to finance another vehicle after Bk.