If I redeem my auto-loan..

ScoreBooster · ‎02-09-2009

Hi,

1. If I should decide on redeeming my auto-loan under BK Ch. 7, would my mother, the co-signer, still be liable for the difference between the amount owed and the amount I would pay for the car? On a different board, somebody stated that the co-signer would be off the hook if the car would be redeemed instead of simply returned. I wanted to ask if that's REALLY true.

2. When I file BK and include that car, do I have to make additional payments to avoid late payments being reported on my mother's CR or will the entire reporting stop for both of us?

3. How are they reporting that loan on my mother's CR after my discharge? My guess would be $0 balance, paid (if the above mentioned fact is true and she isn't liable any more). They can't mention BK on her report, correct?

granny031350 · ‎02-11-2009

they could have your mother pay the difference. Your mother's cr could say "included in the bk of another" and your mother didn't file BK so the entire balance would show for her on her cr. Unless you pay the car off in full, your mother will take the credit hit.

ScoreBooster · ‎02-11-2009

@granny031350 wrote:
they could have your mother pay the difference. Your mother's cr could say "included in the bk of another" and your mother didn't file BK so the entire balance would show for her on her cr. Unless you pay the car off in full, your mother will take the credit hit.

Thanks for your input! Since it took so long on this board until I got a reply, I searched different forums and two other sources told me she would only be liable if I SURRENDER the vehicle, not if I would REDEEM it.

The entire balance CAN'T show on her CR on a redemption since the lender at least got the market-value in a lump-sum. Although it's a co-signed loan, they can't expect a double-payment.

In addition, mentioning BK on a file of a person who DIDN'T actually file isn't allowed either - not even on co-signed accounts.

granny031350 · ‎02-11-2009

A redemption means you repurchased the vehicle at fair market value and not for the entire amount due on the loan. (crammed down) You mother would be responsible for the difference since she cosigned for the original loan. Only if you refinance the entire amount of the car would your mother be off the hook.

Message Edited by granny031350 on 02-11-2009 10:48 PM

ScoreBooster · ‎02-11-2009

@granny031350 wrote:
A redemption means you repurchased the vehicle at fair market value and not for the entire amount due on the loan. (crammed down) You mother would be responsible for the difference since she cosigned for the original loan. Only if you refinance the entire amount of the car would your mother be off the hook.
Message Edited by granny031350 on 02-11-2009 10:48 PM

Ok, makes sense.

It's also possible that the other posters were refering to such a refinancing - although they didn't mention it. I won't sign a new loan with the same crazy interest rate - and especially not for an amount 5x the car's value.

I guess it won't be much of a difference in my case since my mother is going to file a couple of months after me anyway, so I assume all she has to do is to continue to make the monthly payments until she files. She's going to file before I'm going to be discharged.

As far as I know, she would be liable for the entire amount in one payment - but after my discharge. So if she includes that sum in her filing, we should be good to go.

The most important thing is that they can't repo after I filed - with or without payments.

All the money this lender will get from us is the car's value plus the installments 'til she files - might be a total of $2K or even less - but def. not $7K.

And from what you've been telling me, reaffirmation makes no sense. Not financially - and from what you told me, not even for my credit-score. A new loan with an astronomical interest rate doesn't make sense for the same reasons. Too expensive and - yes, bad for FICO. Wouldn't that loan lower the average age of accounts?

So no matter how you look at it - every car-loan will be considered derogatory. And since that's the case. I'm going to do what saves me money - a cash-redemption. Instead of paying off the loan after the discharge through a (now, IMO, useless) reaffirmation or crazy expensive "722 loan", I'd rather deposit the money into a savings-account or use it post-BK to pay off secured installment-loans.

granny031350 · ‎02-13-2009

make sure you involve your attorney in the redemption even if paying cash. You don't want issues after discharge with the lender claiming you still owe. Make sure the court signs the redemption agreement. GL

ScoreBooster · ‎02-14-2009

@granny031350 wrote:
make sure you involve your attorney in the redemption even if paying cash. You don't want issues after discharge with the lender claiming you still owe. Make sure the court signs the redemption agreement. GL

Thanks Granny, I will take care of that!

No while I was lurking on other forums, somebody threw in the opinion that I wouldn't have the choice to redeem at all because it's co-signed?!

Personally - since the co-signer will be held responsible for any amounts still due anyway - I don't see the reason for that logic. The 910 day-rule was mentioned as well, but I'm 99.9% sure that only applies in Chapter 13.

As an alternative, I might simply discharge the loan and have my mother make the regular payments and full insurance coverage until SHE files and have her redeem the car. I would already be in the middle of my CH7 so the lender couldn't come after me.