Why Reaffirm ?

I filed for Chapter 7 last week and my attorney told me not to reaffirm my car payment (which I want to keep). He said as long as my payments are current they will not repo the vehicle. Does this sound right ?

That's a great question. Seems to be a grey area. The new law does not specifically provide for the "ride thru" option as the old law did.

It has modified the process to provide for redeemtion or reaffirmation only, if you want the BK court to PROTECT your right to the property.

Many creditors and petitioners have not met their obligations to reaffirm or redeem, some courts have lost paperwork, refuse to sign the documents, creditors and/or debtors lost or not signed paperwork, etc as to create a "no reaffirmation" discharge.

Some lawyers won't sign them. It obligates them to ensure your able to make the payments. My lawyer does not sign them. So, I rely on the court, if possible.

To me the REAL question is "how is my ownership of property in which I'm making timely payments on protected when reaffirmation does not take place."

This probably is included in consumer law of your state, IF AT ALL.

You may have NO PROTECTION without the BK courts' order of reaffirmation.

Regardless, if the property is repo'd by the creditor, your going to have to return to court, probably with a lawyer, and sue to attempt to get the property back...assuming you win.

A creditor, through mistake or obligation, may feel that repo is their only way to protect their property, and without a court order of reaffirmation or state consumer law preventing them from doing so, they will.

In the meantime, you will be without the property, making payments, paying for legal fees and fighting in court.

So, without redeemtion or reaffirmation protection from the court, you may be looking over your shoulder until payoff time is near.

And, who says they must release the title after you have paid the item off?

Your in default on the original contract, right?

??

Regards,

CPO

Oh, and one more thing. Without a reaffirmation agreement so stipulated, they probably won't be reporting to the credit bureaus either. Rebuilding your credit may be just that much more difficult.

A very good post on reaffirmations, thank you.

A very good post on reaffirmations, thank you.

Thanks, and THANK YOU!! for your wisdom and experience. :yes2:

We'd be lost without it!

CPO

My attorney didn't have me sign reaffirmation papers for my car loan either. I was told that as long as I keep payments current, I will be fine. He knows the law better than me, so I assume there is some California law or regulation that will let me keep the car without reaffirming. I don't believe he would tell me that knowing that I could potentially sue him if my car is repoed without signing a reaffirmation.

Just because a lawyer signs a reaffirmation agreement, it does not make him liabile for your debt. He signs it because he believes you have the resources to make the payments. The code uses the term undue hardship to describe whether it's approriate to sign a reaffirmation agreement.
The reason many won't sign a reaffirmation is, they don't believe it is in your best interest. Remember, if you reaffirm and your situation goes south, you are on the hook for any deficiency balance should your home be foreclosed or, an auto repoed. If you don't reaffirm, you walk away with no liability.
I didn't reaffirm my mortgage when I filed nearly 2 years ago and no problems. The mortgage compamy cashes the check every month and I get an annual statement {that has the disclaimer not an attempt to collect a debt}.

If you remain current in your payments a creditor cannot repo. Make your payments on time, keep the property, don't make the payments and property will be repo'd. Reaffirming has nothing to do with it. By reaffirming all you do is lose your right to <walk> from the debt if you later default. Which is not a big deal since you just went BK. The <only> negative I see with <not> reaffirming is your stellar payment history will probably <not> be reported to the CRA's. One caveat would be to make sure you are current when you file.

If you remain current in your payments a creditor cannot repo. Make your payments on time, keep the property, don't make the payments and property will be repo'd. Reaffirming has nothing to do with it. By reaffirming all you do is lose your right to <walk> from the debt if you later default. Which is not a big deal since you just went BK. The <only> negative I see with <not> reaffirming is your stellar payment history will probably <not> be reported to the CRA's. One caveat would be to make sure you are current when you file.

That is no longer true under Bankruptcy law (or, at least it is not entirely clear), but under certain state law, that may still be true.

Although by the letter of the law, the new BK law did away with "ride through" of secured debts, i.e. the idea that so long as you continue to make your payments, you are good to go...creditors have basically accepted ride through's anyway because it is is in their best interests to continue to receive payments.

Here is how I think this issue will ultimately work itself out in the courts...

If a debtor chooses NOT to reaffirm but is still current on their payments, the creditor has 2 options.

1. Repossess the car (the new BK law gives them this right since a debtor must either Reaffirm or Redeem under the letter of the law, thus, if debtor fails to do either, the creditor has the right to repossess the property).

2. Continue to accept payments.
If the creditor continues to accept payments, then once the BK is discharged, the creditor can only repossess (or foreclose) on a future default (i.e. missed payment). I think the courts are going to limit the remedy to repossess if a debtor fails to reaffirm to an open BK proceeding, i.e. they will limit the remedy to only bankruptcy.

In any event, for the most part, you DO NOT have to reaffirm and more likely than not, you will be able to keep the asset so long as you make your regular monthly payment on time.

In any event, for the most part, you DO NOT have to reaffirm and more likely than not, you will be able to keep the asset so long as you make your regular monthly payment on time.

Since there hasn't been a single case of a creditor <repo'ing> when the account was current and paid in a timely manner..I would agree. My <guess> is that creditors would rather have cash than old cars out back in the parking lot ;)

That is no longer true under Bankruptcy law (or, at least it is not entirely clear), but under certain state law, that may still be true.




Huh?

Huh?

The current bankruptcy law is written in such a way that the debtor is "required" to either reaffirm, redeem, or surrender an asset that is security for a loan. The option for the "ride through" has been "technically" eliminated from the BK Code. However, the act of, and legal standing of the creditor in repossession and foreclosure are controlled by state law. It is at this intersection of state and federal law (BK is a federal law), that is relatively untested...most state's law require a default by the debtor before a repo or foreclosure can proceed. Some states have better defined and more debtor friendly statutes that others. It remains to be seen if failing to reaffirm would be grounds for default and if federal law will trump state law on this issue.

However, as has been the experience of just about everyone on this board and others, so long as you are current on your payments, and remain so, there is very little risk of a repo or foreclosure since the creditor is usually better off to continue to receive payments than retake the property. The big negative for failing to reaffirm is you have no leg to stand on when it comes to the credit reporting of that particular debt.

I see so much about keeping the car after BK that sometimes I wonder if leased vehicles come under this catagory?:unsure::unsure:

I once had a lawyer tell me to not reaffirm because after BK something might happen (the car vandalized, stolen, etc) that isn't covered under my car insurance and the car is undrivable... but you'll still be responsible for the debt owed on the vehicle.

The question of whether to reaffirm or not really depends on your individual circumstances. Under the old law, it was a no brainer, you never reaffirm, and that same advice pretty much holds true under the new law. (but I think most attorneys simple default to that advice because it is the advice they are used to giving and gets them out of explaining that they would have to sign off on the reaffirmation and probably don't want to).

The legal implication of reaffirming is this...if you reaffirm, and later default on the car (or as Marz points out, something happens to the car but you are not covered by insurance), you will be liable for a deficiency balance (the difference between what you owe and the then current market value of the car). If you do not reaffirm, if you later default, etc, you are not liable for any deficiency balance. Thus, it is rarely in a persons best interest to reaffirm...and since car finance companies would lose too much money by forcing a debtor to accept reaffirmation or surrender, no creditor has tested the law.

My lawyer has told me that there indeed HAS been cars repoed after non reaffirmation, but mostly Ford.
My lawyer refused to sign my reaffirm last week too due to negative $250. Only if we got a second income putting us well above the negatives would he sign. That could mean the dreaded 13 though, so no thanks....
Its terribly scary though, to pay while they can take it can take it any day. Like said, will we get ownership papers when payoff happens? Has anyone here?
My husband and I are going to try to look at it from a "We are renting and hopefully will own" point of view.
(If they came for this car we have car I think they would shreak anyhow. Its pretty trashed from two kids, a large dog and delivering newspapers before in wee hours while spilling coffee....)
WAM

My lawyer has told me that there indeed HAS been cars repoed after non reaffirmation, but mostly Ford.
My lawyer refused to sign my reaffirm last week too due to negative $250. Only if we got a second income putting us well above the negatives would he sign. That could mean the dreaded 13 though, so no thanks....
Its terribly scary though, to pay while they can take it can take it any day. Like said, will we get ownership papers when payoff happens? Has anyone here?
My husband and I are going to try to look at it from a "We are renting and hopefully will own" point of view.
(If they came for this car we have car I think they would shreak anyhow. Its pretty trashed from two kids, a large dog and delivering newspapers before in wee hours while spilling coffee....)
WAM

I'm in the same conundrum. If we amend to show that we make an additional $300 a month our lawyer will sign the reaffirmation. But it's unclear if that will push us into a Ch. 13. I really don't know what to do because no one seems to have a clear cut answer to this question.

I always thought the means test was a snapshot of our finances the day we filed, but it seems that some Trustees are bending that vagueness to their benefit. :(

My lawyer has told me that there indeed HAS been cars repoed after non reaffirmation, but mostly Ford.


I am sure cars have been repo'd after non-reaffirmation, but only when the debtor was <not> current with payments. Attorneys have been know to s-t-r-e-a-t-c-h the truth when trying to make a point..Obviously, there is absolutely <no> logical reason for Ford Credit or anyone else to repo a car that the debtor is current on.

In a public bankruptcy forum (like all forums) individuals <hear> all kinds of things and often those <things> are urban legends or as in this case, not all the facts are illuminated. About a year ago a poster was ranting and raving about this very subject (repo'd because non-reaffirmation while current in payments) and it turns out (for those that stuck with the thread, like me) that yes, she was sending in payments BUT TO THE WRONG CREDITOR. That last little bit of info was missing until the end of the thread, which as you can imagine, was significant.

I always thought the means test was a snapshot of our finances the day we filed, but it seems that some Trustees are bending that vagueness to their benefit. :(

The means test is a reflection of your last six months finances, not a snapshot of them the day you file. In addition, the trustee, by law, has a fiduciary duty to make decisions based on significant changes in future income or expenses.

My lawyer refused to sign my reaffirm last week too due to negative $250. Only if we got a second income putting us well above the negatives would he sign. That could mean the dreaded 13 though, so no thanks....


I don't follow this. If you go to Walmart and get a part-time job to eliminate this negative balance, you will then be able to expense this car on the Means Test Calculation worksheet. Those transportation expenses should offset the increased income, leaving you pretty much back where you are now, except you will have your car.

I also assume you have been following this thread, and as posted, why don't you just <not> reaffirm, and keep the car? Make payments <on time> and ride off into the sunset....Believe me, nobody is going to repo it if you are current in your payments..

Now, if it were me, I would hand the car over in a heartbeat and get out from under the debt.

The problem with this particular subject is the fact that there is a level of uncertainty in the law...this subject generates two types of advice, legal advice and practical advice.

The legal advice is...you run the risk of a repo for failing to reaffirm becuase the letter of the BK law "requires" reaffirmation, redeemption or surrender. Thus, it is not clear the debtor has any leg to stand on to prevent a repo if the reason for the repo is failure to reaffim. Thus, you are at least taking some risk of losing your car, even if you are current on payments, if you fail to reaffirm.

The practical advice is...almost without exception, if a debtor is current on her payments when she files BK and continues to make her payments on time and in the full amount, her car has NOT been repo'd for failure to reaffirm.

A good attorney will give you both practical and legal advice, but will stress the legal side of it.

No it all, we are going to keep making the payments on time. We only have one car now as it is, our other died back a while ago.
Im going on 100% lawyers advice.
Ive decided that maybe it is better, as long as they dont take it when we still need it, that its maybe better this way like the lawyer said. This way, if something happens where we cant pay, we can get out and not be stuck.
BTW was this persons car on an old thread repoed because she mailed the payment to the wrong dept. in the car company (regular instead of BR dept) or she mailed them to another creditor entirely? (ODD?) I did a search here and found nothing but this sounds interesting.
WAM

Ive decided that maybe it is better, as long as they dont take it when we still need it, that its maybe better this way like the lawyer said. This way, if something happens where we cant pay, we can get out and not be stuck.


I am sorry, but I have no idea what you are trying to say...I <think> you are talking about a car loan. It is very simple. Make the payments on time and you get to keep the car. Don't make the payments on time and they will take it back. Assume for a moment that you do indeed reaffirm the loan. If you for any reason cannot make the payments, when they come and get it, you will be liable for any deficiencies. An example would be that you owe 10K on the car and they only sell it for 5k you WILL have to pay the 5K difference.

Assume the same thing happens only this time you DIDN'T reaffirm the loan. Guess what? The outcome is EXACTLY the same, that is, you have to pay the deficiency. THAT is why creditors don't really care if you reaffirm or not. The are going to get paid every dime regardless if you do or don't !!

The vast majority of posters haven't figured out that little nugget of information and argue about reaffirming when it is actually.....moot.

To follow up your other question (the one I could understand :blink:)...The creditor was sending her monthly payments to the original creditor when in fact the loan was <sold> to a collection agency and she should have been sending them there. Apparently the original creditor was attempting to apply the payments to the loan, but it was sort of a phantom loan since it was no longer in house and had been sold.

That was a very,very weird situation and I honestly don't believe the poster was completely aware what was happening. Make your payments on time and nobody will be coming for your car, whether you reaffirm or not....good luck

If you dont reaffirm and you dont pay you are NOT liable for any deficency

Only if it was discharged in the BK...if it was NOT discharged then the debtor is liable for any deficiencies. I know, it sounds like it must then be reaffirmed..but it doesn't have to be! Remember, for a reaffirmation to be binding, the judge, debtor and creditor all agree and sign the document. Stating in your BK papers you <intend> to reaffirm is not sufficient...

?? If it was a car loan then it MUST be included in the bankruptcy creditors listing. If it was included in the bankruptcy and not reaffirmed then it will be considered a surrender, ie. if you turn it in (even at a later time) you are NOT liable for any deficiency.

If is is listed (which it is supposed to be) and not reaffirmed and no one objects then it will be discharged just like any other debt they can only object if fraud was commited. If it is discharged and you (at any time now or later) give it up or fall behind on pmts and it gets repoed then you are not liable for any balance owed it would be looked at as surrendered in bk. Only if it is found to be fraud or if you reaffirm would you be liable for any balance.

All debts that are not objected to and proven to be fraud with the exception of child support , student loans and some taxes are discharged when you get your discharge in a chapter 7.Including secured loans as long as they are not reaffirmed. The only difference in a unsecured loan and a secured loan in a chapter 7 bankruptcy is if you do not pay your secured creditor they get the secured property back so the debt is discharged but the lien is still valid. so a year after bk if you default you can give the property back and owe nothing because the debt was discharged you only elect to pay it to keep the property.

I am sorry, but I have no idea what you are trying to say...I <think> you are talking about a car loan. It is very simple. Make the payments on time and you get to keep the car. Don't make the payments on time and they will take it back. Assume for a moment that you do indeed reaffirm the loan. If you for any reason cannot make the payments, when they come and get it, you will be liable for any deficiencies. An example would be that you owe 10K on the car and they only sell it for 5k you WILL have to pay the 5K difference.

Assume the same thing happens only this time you DIDN'T reaffirm the loan. Guess what? The outcome is EXACTLY the same, that is, you have to pay the deficiency. THAT is why creditors don't really care if you reaffirm or not. The are going to get paid every dime regardless if you do or don't !!

The vast majority of posters haven't figured out that little nugget of information and argue about reaffirming when it is actually.....moot.


Reaffirm = all contract stipulations remain per pre BK for creditor and debtor.

Debtor is protected from repo by BK court (during BK proceedings) and thereafter unless debtor is in default. This is true even after the discharge takes place via the permanent stay.

If debtor defaults, vehicle can be repo'd and debtor can be sued for any deficiency balance after sale.

Credit reporting is resumed.

During the contract period and at the full term of the contract period, all terms and conditons must be met by debtor and creditor. Upon completion of payment period, title is transferred to new owner...the debtor, per contract.



Ride through = contract stipulations are moot...debtor is in default. Loan is discharged, security agreement remains in effect. Any claims debtor has via purchase contract are null and void. Creditor has full rights to vehicle unless protected by variable state consumer law.

Vehicle can be repo'd (not saying it will be) anytime as creditor still retains a security interest in the vehicle.

No credit reporting.

If vehicle is repossessed, creditor cannot sue debtor for deficiency after sale as debt has been discharged in BK court.

After payoff, since debtor remains in default, creditor is not compelled by law to issue title. BK court has no jurisdiction.

BK court does not protect debtors claims against creditor. Creditor is not bound by contract stipulations.

Assess your risks.

Take your pick.

CPO

So if we pay off a loan we did not reaffirm they dont have to give us the title?

So if we pay off a loan we did not reaffirm they dont have to give us the title?

I am not sure about that little issue. I think a creditor would have a hard time finding a legal standing to not issue title if there is no argument whatsoever that the creditor is owed any money.

I am not sure about that little issue. I think a creditor would have a hard time finding a legal standing to not issue title if there is no argument whatsoever that the creditor is owed any money.

I guess my point would be that there is no contractual obligation to release the title. Certainly your not protected by the BK court.

So, if they refuse to release the title, you would need to sue them in court...

...compared to receiving the title in the mail once you payed off your loan.

Not trying to argue either point. Just trying to state what I believe the result could be between the two choices...reaffirm or ride through.

CPO

I see what your saying...but since the lien and the rights associated with the lien survive BK; conversely, if the debtor satisfies the conditions to release the lien, the car finance company, I don't think, could refuse to release the lien.

But your right, there is a risk that you might have to take the company to court to release the lien, but IMHO, I think that particular risk is fairly small.

I see what your saying...but since the lien and the rights associated with the lien survive BK; conversely, if the debtor satisfies the conditions to release the lien, the car finance company, I don't think, could refuse to release the lien.

But your right, there is a risk that you might have to take the company to court to release the lien, but IMHO, I think that particular risk is fairly small.

Agreed.

CPO

Well, those of us on ride through will have to all post on what happenes. Kind of like an update on your ridethrough thread. Im sure each state will be different. each compnay as well. Im personally interested in Toyota, but it seems many here are with Ford too.
My payoff is due October '09. I was thinking of taking my tax return next year and plunking it down on the car, so I will payoff in less than one year. Depends on how long my case is dragged on. I figure 341 in August..closing & discharge hopefully well before the trustee starts eyeing up 07 tax returns. Cuz I need mine!!
WAM