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Established Contributor
SoulMaster
Posts: 993
Registered: ‎11-08-2011
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Re: Reaffirmation of car loan


lil_bo_peep wrote:

Okay, so I don't need to reaffirm to keep my vehicle.  I cannot believe my attorney did not tell me that.  I was under the impression that if i didn't reaffirm then I had to give them my car back.  I have just sent him another email regarding this new information.  Thank you SoulMaster!


If you are current and stay current, the lender can't take it back, regardless of debt liability.

 

You're welcome!

 

-SM

 

P.S.  If it's underwater, give it back and go buy a good used one w/ cash. ;-)

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 3/15/14 All 700+. Last CR pull from a lender(housing) was mid-score 729.
Goal Score: 700+ - reached.
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Comet21
Posts: 204
Registered: ‎08-29-2007
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Re: Reaffirmation of car loan

Soul- I appreciate the info. I have spoken with both my home and auto and they both said that they would report correctly after they have been notified by the court to do so(After discharge). Quick question, aren't they obligated to report correctly if we reaffirm since we have to repay and having been making on-time payments? My student loan has started reporting correctly(I know student loans cannot IIB in most cases but it was showing as so on our CR).


Starting Score: TU 477 EQ 533 BK 1/27/2012
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ScoreBooster
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Registered: ‎05-30-2008
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Re: Reaffirmation of car loan


SoulMaster wrote:

lil_bo_peep wrote:

Okay, so I don't need to reaffirm to keep my vehicle.  I cannot believe my attorney did not tell me that.  I was under the impression that if i didn't reaffirm then I had to give them my car back.  I have just sent him another email regarding this new information.  Thank you SoulMaster!


If you are current and stay current, the lender can't take it back, regardless of debt liability.

 

 


I'm not sure about that. Ford credit was well known for repoing vehicles if they weren't reaffirmed. Legally, they can do that.

Established Contributor
SoulMaster
Posts: 993
Registered: ‎11-08-2011
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Re: Reaffirmation of car loan


Corroborate wrote:

SoulMaster wrote:

lil_bo_peep wrote:

Okay, so I don't need to reaffirm to keep my vehicle.  I cannot believe my attorney did not tell me that.  I was under the impression that if I didn't reaffirm then I had to give them my car back.  I have just sent him another email regarding this new information.  Thank you SoulMaster!


If you are current and stay current, the lender can't take it back, regardless of debt liability.

 

 


I'm not sure about that. Ford credit was well known for repoing vehicles if they weren't reaffirmed. Legally, they can do that.


ScoreBooster,

 

I don't mean to be as blunt as I'm about to be, but that's incorrect as of the BK reform laws in 2005.

 

I'm going to cite an article, because it explains it just as well as I would:

 

"Some creditors believe that the new 2005 bankruptcy law requires that a debtor sign a reaffirmation agreement if they want to retain the vehicle. However § 524(c) states that any obligation must be ‘enforceable under applicable non-bankruptcy laws, whether or not such a debt is waived.” As a result, if the debtor is current on his payments, keeps his vehicle insured and still refuses to sign a reaffirmation agreement, there appears no default that is enforceable under non-bankruptcy laws."

 

From http://www.debtkid.com/reaffirmation-agreement-in-bankruptcy-what-is-it

 

To sum that up, they must have the right to repo/foreclose on the property as though you never filed a BK in the first place.  In the Ford example, Ford cannot repossess any vehicle when the loan is current, whether you file or not, because they have no right to repossess until you become delinquent.  It is possible/probably that Ford Motor Credit took current, IIB vehicles back before 2005, but they can't anymore. (If they do, they're breaking the law, the loan-holder would have a ton of recourse and should contact their BK attorney.)

 

The important part is to STAY CURRENT!  If you are even a single day late, the creditor has the right to declare default and come take the car (because they can't contact you on a legally discharged debt).  What should happen if you are late is that the creditor should contact your attorney and request the car back.  In most cases (though not all) calling the creditor can prevent the repo and get you some leniency if you are only a couple days late.

 

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 3/15/14 All 700+. Last CR pull from a lender(housing) was mid-score 729.
Goal Score: 700+ - reached.
Valued Member
lil_bo_peep
Posts: 32
Registered: ‎07-25-2008
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Re: Reaffirmation of car loan


SoulMaster wrote:

Corroborate wrote:

SoulMaster wrote:

lil_bo_peep wrote:

Okay, so I don't need to reaffirm to keep my vehicle.  I cannot believe my attorney did not tell me that.  I was under the impression that if I didn't reaffirm then I had to give them my car back.  I have just sent him another email regarding this new information.  Thank you SoulMaster!


If you are current and stay current, the lender can't take it back, regardless of debt liability.

 

 


I'm not sure about that. Ford credit was well known for repoing vehicles if they weren't reaffirmed. Legally, they can do that.


ScoreBooster,

 

I don't mean to be as blunt as I'm about to be, but that's incorrect as of the BK reform laws in 2005.

 

I'm going to cite an article, because it explains it just as well as I would:

 

"Some creditors believe that the new 2005 bankruptcy law requires that a debtor sign a reaffirmation agreement if they want to retain the vehicle. However § 524(c) states that any obligation must be ‘enforceable under applicable non-bankruptcy laws, whether or not such a debt is waived.” As a result, if the debtor is current on his payments, keeps his vehicle insured and still refuses to sign a reaffirmation agreement, there appears no default that is enforceable under non-bankruptcy laws."

 

From http://www.debtkid.com/reaffirmation-agreement-in-bankruptcy-what-is-it

 

To sum that up, they must have the right to repo/foreclose on the property as though you never filed a BK in the first place.  In the Ford example, Ford cannot repossess any vehicle when the loan is current, whether you file or not, because they have no right to repossess until you become delinquent.  It is possible/probably that Ford Motor Credit took current, IIB vehicles back before 2005, but they can't anymore. (If they do, they're breaking the law, the loan-holder would have a ton of recourse and should contact their BK attorney.)

 

The important part is to STAY CURRENT!  If you are even a single day late, the creditor has the right to declare default and come take the car (because they can't contact you on a legally discharged debt).  What should happen if you are late is that the creditor should contact your attorney and request the car back.  In most cases (though not all) calling the creditor can prevent the repo and get you some leniency if you are only a couple days late.

 



Thanks for the article reference SM.  I do appreciate your help with all of this.  I am as one would say, credit illiterate, bankruptcy illiterate etc.... I am trying to do as much research on here and on other sites as I can but MyFico has been by far the most helpful and insightful!  Of course this is all b/c of the members of this forum.  :smileytongue:

 

Thanks again!

 

Lil_bo

Just a little reminder.....sometimes these boards get a little confusing but we are all here to help each other not make things more difficult, you can only Do what's right for YOU, not what everyone else thinks is right for you! Love you guys!!! :smileywink:
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ScoreBooster
Posts: 465
Registered: ‎05-30-2008
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Re: Reaffirmation of car loan

[ Edited ]

SoulMaster wrote:

ScoreBooster,

 

I don't mean to be as blunt as I'm about to be, but that's incorrect as of the BK reform laws in 2005.

 

I'm going to cite an article, because it explains it just as well as I would:

 

"Some creditors believe that the new 2005 bankruptcy law requires that a debtor sign a reaffirmation agreement if they want to retain the vehicle. However § 524(c) states that any obligation must be ‘enforceable under applicable non-bankruptcy laws, whether or not such a debt is waived.” As a result, if the debtor is current on his payments, keeps his vehicle insured and still refuses to sign a reaffirmation agreement, there appears no default that is enforceable under non-bankruptcy laws."

 

From http://www.debtkid.com/reaffirmation-agreement-in-bankruptcy-what-is-it

 

To sum that up, they must have the right to repo/foreclose on the property as though you never filed a BK in the first place.  In the Ford example, Ford cannot repossess any vehicle when the loan is current, whether you file or not, because they have no right to repossess until you become delinquent.  It is possible/probably that Ford Motor Credit took current, IIB vehicles back before 2005, but they can't anymore. (If they do, they're breaking the law, the loan-holder would have a ton of recourse and should contact their BK attorney.)


Hmm, interesting.

 

Especially since there are a ton of articles out there that basically say that the new law from 2005 actually FAVORS repo in lack of a reaffirmation. Seems like State-Law comes into play.

 

http://www.bankruptcylawofficemn.com/reaffirmation.html

 

"The way things used to work with car loans in bankruptcy was that we'd have our clients do what we referred to as a "ride through", or also called the "stay and pay" option. That basically meant just keep making your payments and keep your insurance on the vehicle and under state contract law the lender couldn't repossess if you didn't reaffirm on the auto loan in your bankruptcy case. With the new bankruptcy laws in 2005 that all changed. The automobile lender lobby is a strong one and they got a provision enacted in the new bankruptcy code that basically states that if you don't reaffirm on the loan that they can repossess the vehicle whether you are current or not. Not quite fair but the Federal Bankruptcy Law takes precedence over state contract law. So most debtors in bankruptcy cases feel quite a bit of pressure to reaffirm on auto loans especially."

 

http://www.avvo.com/legal-answers/chapter-7---after-the-discharge--you-don-t-reaffir-419578.html

 

or

 

http://www.moranlaw.net/secured7.htm

 

"The bankrutpcy amendments of 2005 have introduced even more uncertainty: the provision that said that bankruptcy filing alone could not be a contract default was eliminated. State law probably now controls on whether a contract that is current on payments is breached by merely the bankruptcy filing."

 


Established Contributor
kjm79
Posts: 1,008
Registered: ‎01-22-2008
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Re: Reaffirmation of car loan

Consider the source when reading blogs found on the net, watch for the .com's vs. .gov type site indicators. Law firm sites can be held a little more reliable than ordinary type blogs but still consider the source.  There are creditor rights lawyers and there are debtors rights lawyers, each will advocate for the side they represent.  Always consider the source before just trusting a blog online.  Do some research, consult with more than one attorney (most consults are free), make a truly informed decision. 

 

From http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx under How Chapter 7 Works. 

 

"Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted. Depending on individual circumstances, if a debtor wishes to keep certain secured property (such as an automobile), he or she may decide to "reaffirm" the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy. In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt." 

 

Meaning, the creditor CAN take back the property without a RA.  Doens't mean they will, but they CAN.  So depending on an individual's circumstances and for peace of mind and sense of security, some choose to sign a RA while others do not.  It needs to be evaluated on a case by case basis. 


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SoulMaster
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Re: Reaffirmation of car loan

Ok, to put this issue to bed I called one of the trustees I know and specifically asked him about car reaffirmation/repo.  Here is a quick summary of what he said:

 

First and foremost, not all reaffirmation applications will be approved, it's largely up to the trustee in the case, and if he/she feels it's a bad idea they won't approve it.  Secondly, a trustee (and/or the court) may give a lienholder an EXPLICIT right to reposess a vehicle whose loan is current.  This time, its up to the trustee/court and they may do it if there are multiple vehicles, or the believe there was extravagent or intentional spending that doesn't warrant a dismissal.  (i.e. "I"m going to ignore my credit card payments and go buy this car I can't afford). He added that the petitioner (person filing the BK) can also get EXPLICIT instructions to a creditor that they are NOT to reposess a car (regardless of reaffirmation) unless the debtor misses a payment.

 

Also, he mentioned that creditors DO reposess cars without the explicit permission above or a reaffirmation. Specifically he mentioned Ford Motor Credit but said there were a handful of others that will too. They are the exception, not the norm.  He believes they have no right to do this, but it would have to be challenged in court, and he is a trustee, not a Judge.  He couldn't recall if he'd ever seen a case where the challenge was made in court but his opinion was that the attorneys fee's involved in redeeming a repo would be cost prohibitive, so he wasn't suprised by the fact he didn't hear any challenges.

 

Finally, his advice was very similar to mine: He hates when people reaffirm anything, especially vehichles/houss that don't have positive equity.  His opinion was pretty blunt: "If someone wants to reaffirm negative equity, they haven't learned thier lesson".

 

So there you go.  Depending on your trustee/court/creditor it may be a toss up.  His best advice was that you don't have to reaffirm anything before your 341, so just ask your trustee's opinion during the hearing (regardless of what your lawyer says) if you don't necessarily want to follow your attorney's advice.  Apparently some petitioners will file reaffirmations w/o thier attorneys signature on them.  These will be denied in most cases, but some will lead to the explicit "you can't repo if they're current" orders that I mentioned above.

 

As always, I'm not an attorney.  I'm glad this thread prompted me to call my friend, though, and had some of my opinion/knowledge corrected.  I'll stand by my position that things shouldn't be reaffirmed, however, and that they don't have the right to take the car.  (Even the summary posted on the .gov site by kjm79 says "MAY", which is a specific term usually meaning requirements must be met).  I do understand my friends point though: If they take a car, are you really going to spend an extra $5,000 with your attorney fighting it?  I think this must be what FMC (and the others) rely on.

 

Cheers,

 

-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 3/15/14 All 700+. Last CR pull from a lender(housing) was mid-score 729.
Goal Score: 700+ - reached.
Established Contributor
kjm79
Posts: 1,008
Registered: ‎01-22-2008
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Re: Reaffirmation of car loan

SM, I honestly agree with you on the whole DON'T REAFFIRM ANYTHING theory.  However, I can see instances where it might be a good idea.  If you're filing a BK because you have $100k in medical bills but outside of that have only a mortgage/car loan/minimal cc debt that is otherwise affordable, I could see reaffirming the house and car in a case like that.  Or the previous poster's case where there was $1800 left on the auto loan.  To assure that I keep my house and car, positive payment history, the things that RA's grant, there are times it makes sense to do it. 

 

And you are absolutely right that any good BK attorney should discourage RA's.  Their job is to relieve you of debt, not saddle you with it.  RA's are always going to be YMMV and based on a personal decision.  I can see both the pros and cons of the RA. 


Starting Score: TU? EQ 585 EX? (12/06) (CH 7 bk 11/04)
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ScoreBooster
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Registered: ‎05-30-2008
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Re: Reaffirmation of car loan

When I went through BK, I actually wanted to reaffirm my joined auto-loan because:

 

- I needed that car and since it was our only vehicle and a joined loan with my mother, surrendering was no option.

- There was only a small balance left (about $3K)

- I wanted to keep the creditor "happy" in order to have the creditor reporting my monthly payments in the future, too. I was never late on the loan (the small creditor agreed and reported my payments after filing without any IIB-notation until I paid it off).

 

It turned out that the CREDITOR wasn't interested in a reaffirmation-agreement so the loan wasn't reaffirmed although the trustee would have approved it.

 

In general, I don't recommend reaffirming, either. But there are some circumstances where it might make sense or simply doesn't hurt. It's a case-by-case decision.

 

And finally, I want to point out once again that my research led to the conclusion that the way this matter is handled depends on State-Law. So what one trustee tells you in one State might not apply to the case of a BK-filer in a different State.


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