Please explain ride through vs. reaffirming

As usual I've read alot of threads and get more confused. We are filing CH 7 are current on car payments and planned to keep the car. We owe more than it's worth...I know what you're thinking...get rid of it...however DH wants to keep it and the payments can be handled... We donot have the $ for any downpayment, etc., or to buy it out.

My question is , is it better to do a ride through, or reaffirm?? And What is the difference. Which is better and why?

Our attorney said."Do you want to keep the car?" and I said Yes...it's the only one we have.

Thanks in advance for giving me clarity!

bk22

A ride through is where you keep the collateral, do not re-affirm, but continue to make payments. Not all lenders will work with you on a ride through, so you are taking a risk. That's because when they changed the BK law (in 2005 I believe) they actually removed this option from the law, but because old habits die hard, it still gets used as an option. It will usually work on a vehicle, but not always...Cali has posted in the past about a person who lost their vehicle anyway on a ride through. So if you choose this route, you face a risk of losing your vehicle anyway should the lender see fit to take it from you for any reason.

A re-aff is where you agree to take back the loan after BK--in other words, you are back on the hook for the entire amount. That means that should you default on the loan in the future due to unforeseen circumstances (the kind that drive people into BK in the first place) you will be liable for the deficiency amount, if any, after they repo it and sell it at auction. Unless 8 years has gone by, you can't declare BK again, so you will most likely be sued, depending on the amount due.

So in one sense the safest course is the re-aff--they can't take it away if you continue to make the payments through out the life of the loan..but what if you can't? That's the rub. It's a hard decision and one we wrestled with for several months until we finally decided to chuck both and get a new one which had a lower payment and loan amount than the one we almost re-affirmed. Good luck in your decision. :)

I agree with b_girl, but I must add...a lot of people (posters) have done "ride throughs" and have had no problems. Some filers run into problems with the credit unions, they won't let you reaffirm the car(s) without reaffirming the loans too.

Good Luck!

P.S. We intend to "ride through" and continue to make timely payments when we file ch 13 later this year.

Thanks bgirl and liz!! Now I finally understand it. Thanks so much for the clarification. We'll defiinitely have to think this one through!

bk22

There is caselaw that states a debtor has met their obligation under the code by offering to reaffirm. If it's rejected by the court, the creditor can't repo.

http://www.georgiabankruptcyblog.com/archives/miscellaneous-cases-arizona-bankruptcy-court-ride-through-still-available-for-secured-debts-after-failure-of-timely-filed-reaffirmation-agreement.html


June 22, 2007 | Posted By Scott Riddle | 1 Comments |
Arizona Bankruptcy Court - "Ride Through" Still Available For Secured Debts After Failure Of Timely Filed Reaffirmation Agreement
In re Moustafi (click for opinion), Ch. 7 Case No. 4-07-00407-EWH, 2007 Bankr. LEXIS 1925 (Bankr. D. Ariz. June 4, 2007. The Chapter 7 debtor stated her intention to reaffirm the debt secured by her vehicle. She timely executed the reaffirmation agreement pursuant to §521, and it was accepted by the lender. However, the court found that debtor's income could not support the payments and declined to approve the reaffirmation. The question thus arose as to whether the lender could repossess the vehicle.

If disapproval of the Reaffirmation Agreement means that the Debtor has failed to perform her intention as required by § 521(a)(2)(B), then § 521(d) would apply, permitting Vantage to enforce its ipso facto clause. Post-discharge, Vantage would be able to repossess the Nissan because the Debtor's bankruptcy filing is an event of default under the Vantage Security Agreement.

In In re Husain, 2007 Bankr. LEXIS 768, 2007 WL 709302 (Bankr. E.D. Va. March 5, 2007), the court addressed this issue and found:

The Debtors' timely act of entering into mutually satisfactory reaffirmation Agreements with their creditors must be viewed as sufficient to satisfy the performance standards of § 521(a). Those performance requirements should not be read as a mandate for debtors to entirely consummate their stated intentions. . . . Section 521(a) of the Bankruptcy Code merely requires the debtor to "take steps to act on an intention to either retain or surrender.". . . . The Debtors in the case at bar did everything in their capacity to perform.

2007 Bankr. LEXIS 768, 2007 WL 709302, at *5 (citations omitted in text). This court agrees. The consequences of § 362(h)(1) and § 521(d) -- lifting the automatic stay and making ipso facto default clauses enforceable -- are only caused by a debtor's failure to timely file a statement of intention and/or to timely enter into a reaffirmation agreement, "not by the court's disapproval of the agreement or by its determination that the agreement is unenforceable." Id.; see also In re Blakeley, 2007 Bankr. LEXIS 538, 2007 WL 674712, at *6 (Bankr. D. Utah Feb. 21, 2007) ("It is not necessary for the Court to approve the reaffirmation agreement in order for the Debtor to comply with § 521 or § 362(h).").








In this case, the Debtor filed her Statement of Intention within 30 days of the petition date -- checking the box indicating she wished to reaffirm the Vantage debt. By filing the Statement within 30 days of her petition date, the Debtor complied with the requirements of §§ 521(a)(2)(A) and 362(h)(1)(A). The Debtor's first meeting of creditors was held on May 8, 2007. By executing and filing the Reaffirmation Agreement with the court prior to that meeting, the Debtor complied with the requirements of §§ 521(a)(2)(B) and 362(h)(1)(B). Accordingly, the Nissan remains property of the estate and the automatic stay remains in effect until the Debtor receives her discharge. See 11 U.S.C. § 362(c)(2)(C).

Once the discharge is granted, because the Debtor has complied with § 521(a)(2), Vantage may not repossess the Nissan as long as the Debtor is current on her payments and insurance obligations. n10 See Parker, 139 F.3d at 673; see also Blakeley, 2007 Bankr. LEXIS 538, 2007 WL 674712, at *6 (BAPCPA has not entirely eliminated the possibility of ride-through; "where a debtor timely complies with all requirements under §§ 521 and 362(h), the debtor can 'ride through' the bankruptcy notwithstanding a bankruptcy court's refusal to approve the reaffirmation agreement.").

n10 The result would be the same if § 521(a)(6) applied to the Debtor. Section 521(a)(6)(A) requires that a debtor enter into a reaffirmation agreement -- not that the reaffirmation agreement be approved by the court.


.......

BAPCPA added the following to the end of subparagraph (C): "except as provided under 362(h)." However, as explained earlier in this decision, § 362(h) does not apply to debtors, like Ms. Moustafi, who have timely complied with the requirements of §§ 521(a)(2)(A) and (B). Consequently, when § 362(h) does not apply, § 521(a)(2)(C) has the same effect as it did under Parker: "The debtor's other options remain available, as unambiguously stated in § 521[a](2)(C). . . ." 139 F.3d at 673. There is no reason for this court to reach beyond the plain language of the statute to implement some presumed Congressional intent to completely eliminate ride-through when the unambiguous language of §§ 521(a)(2) and (a)(6) limit BAPCPA's anti-ride-through provision to debtors who fall within the purview of §§ 362(h) and 521(d).

Interesting article, keep. To clarify this a little more...if you agree to re-affirm a loan, it has to be approved first by your lawyer and then by your judge. If either sees that re-affirmation is not in your best interest, you will not be allowed to re-aff that loan.

Another thing about reaffirmations that I was not aware of as you dont read about it much here and of course our attorney never said a word.
If you owe more than its worth and are in the negative on your schedules then your attorney may not sign off on a reaffirmation.
What this means is that you will have to have it approved by the a BK judge. That will involve you going for a hearing and explaining why it is in your best interest or how you will be able to pay the monthly bill. The judge is looking out for you believe it or not.

At this point if the judge does not agree a reaffirmation is in your best interest he will deny it. That doesnt mean you wont be able to keep the car it just means that you will not be held legally responsible for it it.
You must continue to pay if you want to keep it. Thats of course if the lien holder lets you.

We changed our mind before the hearing and decided to just let it go. Good thing too because I know a reaffirmation was NOT in our best interest and probably wouldnt have be approved. Reaffirmations only benefit the creditor. Ours was a Credit Union and they would have wanted the car back anyways. No reaffirmation, No car. On their reaffirmation they added in additional fees and payments. Made me sick to think thats how they were going to treat us while we did THEM a favor by continuing to pay for the vehicle.

They just sold it for about $2500! We still owed nearly $9000. Their loss!

Please dont allow yourself to be ripped off on a vehicle. While I know its your only form of transportation right now please also consider other options.

Like I said at first we never even entertained the idea of given our car back. We had already paid for 2.5 years... wouldnt that be money flushed? When in actuality if I continued to pay for it for the next 2.5 or so that would have been money flushed. Just weigh your options.

I have been without a car (2 car family) for a couple of months. Hubby just found me a wonderful chevy cavalier. 2002- 53000 miles for less $2000. It needs brakes and new tires is all. He does all our car work so for about $500 more I will be driving a little zippy car that is good on gas and NO CAR PAYMENT! :clapping:

One other thing to also keep in mind regarding ride-throughs, particularly when it comes to a car, is your state laws. Your state laws still apply after your BK is discharged and closed, and some states do not allow repo as long as you are current, regardless if you sign a reaffirm or not (our state, Massachusetts, is one of them).

I found this excellent article while doing some internet searching today...

http://www.doanlaw.com/blog/?p=11

Thanks keepmine, bgirl, momof5 and laura...I so appreciate all the information and articles. It really gave me a much better understanding of it all! Just like going to school without having to sit in class, other than on my computer...much more fun!

Thanks to all of you who keep educating us!!

bk22

Thanks keepmine, bgirl, momof5 and laura...I so appreciate all the information and articles. It really gave me a much better understanding of it all! Just like going to school without having to sit in class, other than on my computer...much more fun!


bk22


Ain't that the truth! It's like we're mini BK experts...we've probably picked up more info than quite a few of the paralegals out there.

And you're quite welcome. :)

I just wanted to add that we signed a reaffirmation agreement on our Escalade and now wish we hadn't.

At the time we filed, we actually had equity that we had to exempt. Now, we owe $19K and it's worth half of that. We try to trade it in and can't roll in that kind of equity.

If I could go back and do it all over again, I would've never signed it. I would've let it go and started over.

Good luck to you!

I found this excellent article while doing some internet searching today...

http://www.doanlaw.com/blog/?p=11

Eating some steel-I like that!