09-08-2012 07:11 PM
I'm in the process of filing for Chapter 7. The only decision left is whether I decide to reaffirm on my car loan with Santander.
I currently owe $5800.00 still on a 2008 Kia Spectra which was financed back in March,2010 @20.9% interest. My last payment would be March 2014. The car is in pretty good condition except for the high mileage. When I bought the car used in 2010, it already had 35,000 miles. It now has 104,000 miles due to my job which requires daily driving all over a large metropolitan area and on the freeway. I know it would be better to walk away from the car but I'm worried that I won't be able to come up with a down payment in time to buy another car. I need to have a car every day and would have to rent a car until I could buy another one.
I'm not behind on the payment. Until the BK is finalized, the only money I would be able to save is what I'm paying now for my car payment monthly. My payment is $365.00 a month. Even after the BK is final, I won't have extra money since the BK is on old debts. I'm busy paying the state and the IRS to avoid tax liens.
How is Santander to work with when trying to reaffirm on a current car loan?
09-09-2012 06:27 AM - edited 09-09-2012 06:28 AM
Are you working with an attorney, and what is his or her advice? You aren't specific about what the car is worth, or what you think you would have to pay to replace it. I'm assuming it isn't worth more than you owe, but you'd have trouble getting a comparable car financed.
While the lender may try to tell you you "must" reaffirm to keep the car, that depends on your BK Court and State's rules. Some lenders make simply filing an act of default in their contracts and use that to force you to reaffirm instead of doing a "drive through".
My attorney was adamantly against reaffirming because essentially you give the lender something with no consideration in return. No lender is going to cut the interest rate or make other changes in your favor as a consideration for you to reaffirm. There's no reason for Santander not to reaffirm at your current terms as if they get the car back they won't recover what you owe.
It seems to me you may be able to get the collateral value separated from the unsecured excess (what the lender will get after repo vs. The current note amount), called a "cramdown". But that's an attorney question and may only be in a Chapter 11.
Here's what I'd consider:
1. Do a drive-through if possible. You won't be legally obligated on the debt but the lender can take the collateral if you default. They will NOT report your payments to a credit bureau unless you reaffirm (and might not even then). You can walk away and give back the car any time you're ready to get a new one.
2. Look into a cramdown and use that to negotiate
3. Reaffirm. You'll have the car payment for 18 months but sometimes the devil you know is better. You know the car's maintenance history and reliability, you need a car for work, and I doubt you'll get another car as good for a lower payment any time soon.
09-09-2012 11:46 AM
Thank you for replying.
My attorney told me that I can either reaffirm or walk away and get another car post bankruptcy. He said that it would also depend on Santander and how willing they are to reafirm. he also said that we may be able to get them to lower the interest rate, but it was a "Maybe". I'm concerned though how much money I would need to put down post BK. right now I don't have any savings right now due to paying the IRS and the State on back taxes.I make pretty good money at 65K a year and will be able to afford a payment up to $450 a month.
According to Kelly Blue Book, it's worth $5500 to sell outright due to the high mileage and some small door dings/paint chips. Trade in value is $3800. I owe $5800 as of this month. So far, it's been very reliable. I have only needed to change the timing belt ( it was past 97,000 miles), replace the tires, and the usual maintenance oil changes and brakes. I'm afraid that it may soon start breaking down due to the high mileage. And it's a KIA which doesn't really have a good reputation like a Toyota or Honda to not have major issues as the mileage climbs.
Right now I'm leaning towards keeping the car and attempting to reaffirm..
09-09-2012 05:46 PM
So it sounds like it will cost roughly the same as what you owe to replace it. You'd be getting a similar car where you don't know the maintenance history. If I were in your shoes I would try for a drive through, if Santandar can force you to reaffirm to keep the car then reaffirm. I question whether they would reduce the interest rate. You need the car for business and if you're at all like I was when I was about to file you need to reduce the stress wherever you can.
Hyundai and Kia have gotten a pretty solid reliability reputation from what I've heard.
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