Another auto loan question...

[remharri]

I just filed chapter 7 a few days ago and I am reaffirming my auto loan. I want to keep my car as I have to travel for work once a month out of town. With that being said, it’s a reliable car and will be paid of in 18 months maybe sooner now that I won’t have all the extra payments. The car according to my attorney is worth $10k and I owe $8700 on it. It’s also through a local credit union (does that make a difference). The reason why I wanted to reaffirm it is because it’s 2013 with 58k miles on it and almost paid off. The payment is $465 a month and I am finally in the home stretch of paying it off and being car loan free for a few years (fingers crossed).

Should I reaffirm? I don’t want to take the risk of it being taken from me as I don’t want a high interest rate (currently at 3%) and don’t want to start over with years of payments again in a new loan.

Thanks in advance! This is all so confusing for me.

[DaveInAZ]

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@remharri wrote:
I just filed chapter 7 a few days ago and I am reaffirming my auto loan. I want to keep my car as I have to travel for work once a month out of town. With that being said, it’s a reliable car and will be paid of in 18 months maybe sooner now that I won’t have all the extra payments. The car according to my attorney is worth $10k and I owe $8700 on it. It’s also through a local credit union (does that make a difference). The reason why I wanted to reaffirm it is because it’s 2013 with 58k miles on it and almost paid off. The payment is $465 a month and I am finally in the home stretch of paying it off and being car loan free for a few years (fingers crossed).

Should I reaffirm? I don’t want to take the risk of it being taken from me as I don’t want a high interest rate (currently at 3%) and don’t want to start over with years of payments again in a new loan.

Thanks in advance! This is all so confusing for me.

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I assume you're current on the payments? Normally it's better to not reaffirm, especially when you owe more than the car is worth. But yes, it does make a difference that the loan is with a local credit union. Normally if you don't reaffirm they can't repossess the car unless you are in default with payments more than 30 days late. But many credit unions put a clause in the loan docs that if you file BK you are automatically in default and unless you reaffirm they will repo regardless if the payments are current. Dig out your loan docs and check this, it will be the section headed by the word "default". If it states that if you file BK you are in default then if you want to keep the car you will need to reaffirm. If not, talk with your attorney and consider not reaffirming and stay current on the payments and keep the car. 

[Anonymous]

Agreed -- it sounds like you have $1,300 of equity, assuming the vehicle can sell for $10k. This value may be lower depending on which value was pulled (e.g. NADA vs. KBB; trade-in vs. clean retail vs. private party).

If your credit union will work with a loan that's not reaffirmed, there's little reason to reaffirm. For example, if the engine in this car goes out and costs $2,500 to repair, you no longer have equity ($10k - $8.7k loan - $2.5k repairs). Instead, you'd be upside down by $1,200. If you lose your job and miss a payment or two, these payments would likely be reported on your credit report if you reaffirmed the loan. No additional negative reporting if you didn't reaffirm.

For reasons like these it may be good to keep your options open.