Reply
New Member
Insoc
Posts: 4
Registered: ‎09-07-2013

Question on reaffirming cars and credit report after bankruptcy.

I recently discharged from chapter 7 bankruptcy, I have two cars, one is leased the other is financed both with Ford Credit.  Ford required both to be reassumed/reaffirmed.  I signed the documents, my lawyer and Ford's lawyer signed, both were filed into the court and only the financed car required a hearing in front of a judge who approved it and that's it.

 

After discharge I checked my credit reports, all showed both cars as being "discharged in my bankruptcy" and both as a "negative".   I disputed this with all three agencies, as of this time, TransUnion has updated my report to show the financed car as being reaffirmed and a positive, and they totally removed the leased car from my report which I thought was odd since I am current on payments and only have less than a year left on it.  

 

My question is, should I attempt to ask why it was removed and/or if having it on my report will help or not?

Established Contributor
ezdriver
Posts: 1,028
Registered: ‎08-24-2013

Re: Question on reaffirming cars and credit report after bankruptcy.

[ Edited ]

I just went through a similar situation with Ch 7 a few months back and learned a few things. Reaffirming a debt does not preclude the court from relieving you of responsibility to continue making payments. Reaffirmation simply gives the creditor the legal right to repossess your car if you miss a single payment and sue you for any deficiency. The trustee will often reject reaffirmation but not always. In my case, I settled with the trustee for a flat fee of $3k and he did not care what I chose to do with the car/car loan [which I kept, reaffirmed and continue to make the payments on time]. My attorney told me that I could simply walk away from the loan as it would have been discharged along with all the other debt that I included in the filing and by doing so, the auto loan creditor had no legal recourse on me for any deficiency when the car was disposed.

 

A lease is completely different in that the ownership of the car remains with Ford. You never owned the car. You were simply paying for a specific portion of the car's value over time. That's what a lease is. Your lease payments were discharged along with the other included debt hence the reason that it no longer shows up in your credit report. The fact that Ford had you reaffirm your lease was simply to give them the legal ability to come after you for any fees due them should they repossess the car before the end of your lease. In fact, they could sue you for evey penny you own under that lease ... so you had better not walk away from that lease or miss any payments either.

 

Reaffirmations are high discouraged by bankruptcy attorneys for one simple reason ... you no longer have the legal protections of bankruptcy laws one you reaffirm.

 

By the way, in most cases, the creditors cannot seize the collateral, even after bankruptcy, just as long as payments remain current ... with no reaffirmation. How do you like them apples? Funny what one can learn from a little bit of research on this here internet!



Starting Score: 618
Scores on 10/9/13: EFX 652, XPN 669, TUC 662
Scores on 3/17/14: EFX 649, XPN 677, TUC 681
Goal Score: 720 ALL


Take the myFICO Fitness Challenge
Moderator
pizzadude
Posts: 8,229
Registered: ‎01-28-2010

Re: Question on reaffirming cars and credit report after bankruptcy.

Moving to Bankruptcy forum for additional feedback.
March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
New Member
Insoc
Posts: 4
Registered: ‎09-07-2013

Re: Question on reaffirming cars and credit report after bankruptcy.


ezdriver wrote:

I just went through a similar situation with Ch 7 a few months back and learned a few things. Reaffirming a debt does not preclude the court from relieving you of responsibility to continue making payments. Reaffirmation simply gives the creditor the legal right to repossess your car if you miss a single payment and sue you for any deficiency. The trustee will often reject reaffirmation but not always. In my case, I settled with the trustee for a flat fee of $3k and he did not care what I chose to do with the car/car loan [which I kept, reaffirmed and continue to make the payments on time]. My attorney told me that I could simply walk away from the loan as it would have been discharged along with all the other debt that I included in the filing and by doing so, the auto loan creditor had no legal recourse on me for any deficiency when the car was disposed.

 

A lease is completely different in that the ownership of the car remains with Ford. You never owned the car. You were simply paying for a specific portion of the car's value over time. That's what a lease is. Your lease payments were discharged along with the other included debt hence the reason that it no longer shows up in your credit report. The fact that Ford had you reaffirm your lease was simply to give them the legal ability to come after you for any fees due them should they repossess the car before the end of your lease. In fact, they could sue you for evey penny you own under that lease ... so you had better not walk away from that lease or miss any payments either.

 

Reaffirmations are high discouraged by bankruptcy attorneys for one simple reason ... you no longer have the legal protections of bankruptcy laws one you reaffirm.

 

By the way, in most cases, the creditors cannot seize the collateral, even after bankruptcy, just as long as payments remain current ... with no reaffirmation. How do you like them apples? Funny what one can learn from a little bit of research on this here internet!


I did a lot of research prior on reaffirming and discussed this with several lawyers prior to filing, from what I found Ford Credit does not do ride throughs, they require reaffirmation or reassumption of leases all the time and others reported similar stories.  If you do not sign it, they will repo 100% of the time even if you have a car that is worth nothing to them at the auction.

 

From what I was told and have read, a reaffirmation is only liable debt if it's approved by the Judge and court, as long as you make your payments and do not fall behind they cannot reposses the car (more on that later).  My financed car went through two stages, a signed agreement provided by Ford Credit's lawyer, that was signed by me, my lawyer and then the lawyer representing Ford Credit, which in turn was filed into the court per the law with 60 days given to change my mind.  

 

The leased car was identical to the above.

 

A few weeks prior to discharge, I got a letter from the court about a hearing to determine the reaffirmation agreement on my financed car, based as "presumption of undue hardship".  The hearing was 5 minutes long, the Judge said are you aware of the terms and etc. and approved it right on the spot.  Afterwards I asked my Lawyer about what if the Judge did not approve?  Lawyer said if he did not approve it, Ford Credit would have repossed the car.  I read several different views on this, some say as long as you did your part legally up to the Judge's approval, there is nothing the creditior can do since you signed it, others say that they can repo it.  I am still not sure on that one, but my leased car was not approved by the Judge, my discharge came and went and Ford has not notified me on a repo for the car, I get my bill in the mail like before I filed bankruptcy.  So that leaves some explaining, if it was not approved by the Judge, then where is the repo man?  Maybe leases are different, or maybe due to the fact I have less than a year left on the lease they did not bother?

 

The question is, I did not discharge the debt or the cars in my bankruptcy, my schedules were filled out with intent not to include the cars, I thought as long as I was current on it and reassumed the lease that the info would remain on my credit report as  positive credit history.  That's the part that is confusing me.  If I'm still liable for the debt, it should be showing as positive history in my credit report.  

 

 

 

 

Established Contributor
ezdriver
Posts: 1,028
Registered: ‎08-24-2013

Re: Question on reaffirming cars and credit report after bankruptcy.

[ Edited ]

Yes, the trustee has to approve a reaffirmation and then send it to the judge with a recommendation. The judge is not obligated to accept the trustee's recommendation but they usually do accept it.

 

You may have had enough exemption value to cover your financed car hence the reason why the car was not specifically listed as a discharged debt on your filing papers. Essentially the court had no reason to rule on that car but Ford's finance agreement may had had verbiage that states automatice repo if a debtor files bankruptcy. That is common with credit cards ... they are terminated by the creditors automatically upon filing of banruptcy. It happed to me with both Wells Fargo and Capital One. When I called the banks, they both told me that their policy requires termination of the cards even if they had zero balances on them.

 

I specifically expressed my willingness to reaffirm one of my two cars [it is a 2007 Mercedes E350] financed by a sub-prime lender]. Initially the lender did not care but they changed their mind because the trustee was claiming that the lender may not have "perfected the title" and therefore there was a small possibility that the trustee would take steps to seize the car even though I was entitled to keep it. Weird stuff by greedy trustee. The 2nd car, a 2002 Mercedes E430, was owned outright.

 

Courts never seize leased vehicles. To the trustee, it looks like a rental agreement and you are never the owner. At least that was how my trustee described it in court as I listened to other people's cases.

 

I learned a lot from the process. To me, it was just another legal transaction so I never got stressed out over it but I did get mad at how greedy the trustee was. He just wanted money in his own pocket. There was no money for any creditor. A huge chunk of my debt was taxes owed to the IRS. It did not bother me to be relieved of that for sure. Do you know anyone who would feel bad about not being able to pay the IRS?

 

 

 



Starting Score: 618
Scores on 10/9/13: EFX 652, XPN 669, TUC 662
Scores on 3/17/14: EFX 649, XPN 677, TUC 681
Goal Score: 720 ALL


Take the myFICO Fitness Challenge
Established Contributor
SoulMaster
Posts: 976
Registered: ‎11-08-2011

Re: Question on reaffirming cars and credit report after bankruptcy.

Go pull your full bankruptcy file from pacer.gov.  It should tell you pretty quickly whether or not they were officially reaffirmed - I think that's the big question here.  Or, have your attorney get you a copy of the fully-executed reaffirmation paperwork.

 

You're right about FMC not doing ride-throughs, but the other posters are correct about most reaffirmations on underwater vehicles(and leases) not being approved by the courts.  Especially leases... the courts hate those (they're for suckers).

 

I'll tell you what, if you've got negative equity in the 1st vehicle, you'll be about a billion times better off if the reaff never went through and the court did you the vavor.  Same thing with the lease.  Just go get some nice cheap cars that will "get you by" for a while, read the 7 to 700 guide (and the "What all of us BK7 people need to remember" post) and get started on your rebuild.

 

Good luck,

 

-SM

I am not an attorney and none of what I write should be construed as legal advice. For legal advice please consult an attorney.

Starting Score: ~470 preBK(8/2010)
Current Scores as of 8/2/13: EX 710, EQ 691, TU 709, all 3 LP for a Mortgage (TriMerge Report)
Goal Score: 700+ FICO across the board w/ my BK still on there (until 8/2020) - I think they're all already there... haven't had a bank pull a trimerge in quite a while.
New Member
Insoc
Posts: 4
Registered: ‎09-07-2013

Re: Question on reaffirming cars and credit report after bankruptcy.

[ Edited ]

SoulMaster wrote:

Go pull your full bankruptcy file from pacer.gov.  It should tell you pretty quickly whether or not they were officially reaffirmed - I think that's the big question here.  Or, have your attorney get you a copy of the fully-executed reaffirmation paperwork.

 

You're right about FMC not doing ride-throughs, but the other posters are correct about most reaffirmations on underwater vehicles(and leases) not being approved by the courts.  Especially leases... the courts hate those (they're for suckers).

 

I'll tell you what, if you've got negative equity in the 1st vehicle, you'll be about a billion times better off if the reaff never went through and the court did you the vavor.  Same thing with the lease.  Just go get some nice cheap cars that will "get you by" for a while, read the 7 to 700 guide (and the "What all of us BK7 people need to remember" post) and get started on your rebuild.

 

Good luck,

 

-SM


I have both reaffirmation agreements, they are both on Pacer as well and filed with the court per the laws.  Like I said on the financed car was brought before a hearing pre-discharge with the Judge who approved it.

 

I just purchased the financed car 3 months prior to filing, got a decent APR with bad credit from being out of a job for 6 months prior and falling behind on cc payments, read mixed reviews on doing it, but it helped me pass the means test (I was working at the time and was going 13), but lost my job 2 months later and was able to file 7 instead.  I was originally planning a long 3 to 5 year 13 with a car that was 15 years old and becoming unreliable.  I had two job losses in a year, a reduction in salary and I did not want to chance it with the car and not having any funds available to buy another with a reduction in salary and potential repayment plan that would leave me little leftover.

 

The leased car is my wife's car, only has 7 months left on it, made no point at the time to surrender it because she needed a car to get to work and the cash flow did not dictate buying a beater, I had to come up with $ for the BK filing.

 

If I surrendered both cars, we would have been left without  any means to get to work, that may work for some people who have thousands in savings, we had little and the BK fees took care of most of it.  I did not land a job for a month after losing my 2nd job in a year, took a serious pay cut but can make my payments without an issue.  In 7 months the leased car will go back, I can at that time by a used lower cost car and thanks to the positive record of my financed and hopefully leased car, my credit will improve faster, so far it has since filing.

 

Everyone's situation is different, what works for some people doesn't necessary work for others.  I found that out after reading and asking hundreds of questions on various forums and meeting with 3 Lawyers.

 

Only question I am asking is whether or not my credit report should reflect both cars as "paid as agreed", for TU it now shows my financed car as such, but they removed my leased car totally.  I read by law they do not have to show it, so it might be a futile attempt to have it shown as I want and as a positive.  

Established Contributor
ezdriver
Posts: 1,028
Registered: ‎08-24-2013

Re: Question on reaffirming cars and credit report after bankruptcy.

"Only question I am asking is whether or not my credit report should reflect both cars as "paid as agreed", for TU it now shows my financed car as such, but they removed my leased car totally.  I read by law they do not have to show it, so it might be a futile attempt to have it shown as I want and as a positive."

 

 

Just thought of this ....

 

Have you contacted FMC and ask them about what they are reporting to the bureaus? My understanding is that continued payments on reaffirmed debt often does not get reported nor are they required to be be reported. I just found out that my current reaffirmed auto loan is not reporting to any credit bureau and I pay ontime every month. That is the reason for me getting a secured installment loan to improve my tradeline mix.

 

Let us know what FMC said please.



Starting Score: 618
Scores on 10/9/13: EFX 652, XPN 669, TUC 662
Scores on 3/17/14: EFX 649, XPN 677, TUC 681
Goal Score: 720 ALL


Take the myFICO Fitness Challenge
New Member
Insoc
Posts: 4
Registered: ‎09-07-2013

Re: Question on reaffirming cars and credit report after bankruptcy.


ezdriver wrote:

"Only question I am asking is whether or not my credit report should reflect both cars as "paid as agreed", for TU it now shows my financed car as such, but they removed my leased car totally.  I read by law they do not have to show it, so it might be a futile attempt to have it shown as I want and as a positive."

 

 

Just thought of this ....

 

Have you contacted FMC and ask them about what they are reporting to the bureaus? My understanding is that continued payments on reaffirmed debt often does not get reported nor are they required to be be reported. I just found out that my current reaffirmed auto loan is not reporting to any credit bureau and I pay ontime every month. That is the reason for me getting a secured installment loan to improve my tradeline mix.

 

Let us know what FMC said please.


I just contacted Ford Credit, I'll see what they say?  No, they (Credit Reporting Agencies) are not required to list reaffirmed debt by law, Lawyer said they should but there is nothing legal he can do other than it being listed as being discharged which has been corrected on at least one of the three.  TU  corrected the financed car to show "paid as agreed" but the lease was deleted off my report, I am still waiting for the results from Experian and Equifax.  Maybe it's nothing to get concerned about, but it's not helping my score but it's not "dated credit" so it probably won't matter but a few points?

 

I tried a secured card but it was through Capital One and they declined me, I am on their black list because they were one of my creditiors.  I may try my bank or a CU next.

Established Contributor
ezdriver
Posts: 1,028
Registered: ‎08-24-2013

Re: Question on reaffirming cars and credit report after bankruptcy.

Thanks for the clarification. I suggest that you not worry about the lease payments not being reported and focus on rebuilding your credit like I'm doing now. if you want, you can have two secured creditcards from First Progress with no credit pull. I applied, paid the deposit online with my debit card and got the cards in the mail. Annual fee was $44 on one and $39 on the other. Don't let creditors jack you around because there are sufficient sources out there to help you. My other source for a secured credit car as well as a small [$1,000] secured installment loan is my local credit union [Vystar CU]. Don't let them make you feel defeated or inferior ... just move onwards to better things in the future. Good luck.



Starting Score: 618
Scores on 10/9/13: EFX 652, XPN 669, TUC 662
Scores on 3/17/14: EFX 649, XPN 677, TUC 681
Goal Score: 720 ALL


Take the myFICO Fitness Challenge

myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.

>> About myFICO
FICO Score - The Score that matters
Click to Verify - This site chose VeriSign SSL for secure e-commerce and confidential communications.
Fair Isaac Corporation is a BBB Accredited Financial Service in San Rafael, CA
FOLLOW US Social Media Facebook Twitter Pinterest Google+