Reaffirmation - CU Demands

[BobMango]

Just filed this week. I have a vehicle that I owe just over $12K on. The KBB trade-in (lowest value) is about $20K. I called my CU today to talk about modifying the loan. My current payment is $650 and they are willing to drop the payment to $400. Also, I thought I was just one month behind but it turns out it's actually two months. No problem, the CU is also willing to bring us current with just one payment. The thing is they only will do this if I and my attorney sign a reaffirmation agreement. They don't want to wait for the judge to sign off if my attorney won't.

I'm not going to surrender the vehicle so the first option is this: bring the loan current and ride it out. This will require 3 payments in November for a grand total of $1950. Then I still have to make $650 payments for the next 20 months.

Option 2 requires signing a reaffirmation and making one $650 payment and one $400 payment in November (plus $125 to my attorney.) Of course then then cash flow moving forward is better by $250 per month but I add another 12 months or so to the loan.

I'm strongly considering reaffirming and am talking with my attorney about it now. The benefits are that I keep the vehicle, my monthly cash flow improves by $250 a month, and my cost to get the loan back on track is cheaper by about $775. I believe my CU will report to the credit bureaus which should help rebuild my credit.

The downside of course is that I'll be committing myself to a loan that would not be dischargeable should my financial condition worsen. I think the risk is minimal since there is $7-8K in equity on the low end, so even if I couldn't sell it, the odds of having a large deficiency to cover are fairly low.

My attorney originally advised against reaffirmation but this will cover about half of the deficiency between my income and expense schedules.

Any reason to second guess the reaffirmation in this situation?

[OhioFiler]

Option #3 Sell the car and buy a used car for $7,000 with the equity you have now. That saves you $650 or $400 each month over options #1 and #2.

[pcn]

Was your 8k equity covered by an exemption when you filed?

[aces67]

What year model is the car? How many months are left owing on the loan?

[BobMango]

OhioFiler, you are right, there is a third option. But I don't have to make that choice right away. I'm still working on the budget and I'm getting close to break even on the means test. If I can't make it work then I will sell the vehicle.

Right now I can't sell it as we just filed.

Pcn, The equity in the vehicle is covered by exemptions, we're using the Federal exemptions and applying the unused homestead.

The only exposed asset I have right now is six cows. We did apply the federal exemption for animals ($525 per animal) to them so if the trustee takes them we'll at least get that amount. We're betting the trustee doesn't want them, but we're prepared either way.

[BobMango]

Aces, it's a 2006 F250 Super-Duty Diesel with just about 75K miles. There are about 20 months left to pay at the current rate.

[DebtHelpSD]

You referenced a "deficiency" between your income and expense schedules. In such circumstances, it would be unlikely for a judge to approve the reaffirmation agreement and possibly malpractice for the attorney to agree to certify it. The suggestion to sell the vehicle is a sounds one, although you'll probably need to wait until the expiration of the time to object to your exemptions (30 days after the meeting of creditors).

[LSUTiger32]

Option #3 Sell the car and buy a used car for $7,000 with the equity you have now. That saves you $650 or $400 each month over options #1 and #2.

Jackpot. Dude, you can get a very nice used car for $7,000 and save $650 a month. That's gold!

[AngelinaCat]

The suggestion to sell the vehicle is a sounds one, although you'll probably need to wait until the expiration of the time to object to your exemptions (30 days after the meeting of creditors).

Actually it is 60 days after the meeting of creditors (341), sometimes longer if the case is ruled an Asset case.

[kenshirley]

KBB is not the real world and what you see online is not the same KBB that dealers and banks have.
Try checking Craig's List to see what a like car is selling for in your area.
I think you are going to be surprised.

[DebtHelpSD]

Actually it is 60 days after the meeting of creditors (341), sometimes longer if the case is ruled an Asset case.

I'm not sure where you are getting you information, but you are incorrect. Rule 4003(b) of the Federal Rules of Bankruptcy Procedure the governing authority on this. The deadline to object to any claim of exemption is 30 days after the conclusion of the meeting of creditors, although this timeline can be extend if there debtor amends Schedule C for some reason.

[BobMango]

KBB is not the real world and what you see online is not the same KBB that dealers and banks have.
Try checking Craig's List to see what a like car is selling for in your area.
I think you are going to be surprised.

You're right, I am surprised. The sales prices I see on Craigslist seem to be more than the amount I got from KBB. I searched the west coast and only found a few listed for less than my estimate. One of those has three times the miles and the other was converted to a flatbed. Most are listed for more than the KBB number. Don't know if they are selling at those prices, but they are definitely listed higher.

[kenshirley]

If you are looking at dealer sales forget them and look only at private.
You will find they are less than KBB.

[BobMango]

Jackpot. Dude, you can get a very nice used car for $7,000 and save $650 a month. That's gold!

I agree, but if the trustee doesn't take my cows I need something to haul them with. Plus it's tough to haul hay in a hatchback.

We'll have to see what my attorney and the CU say before making a final decision. I'm not especially attached to the truck, but I'd like to keep it if I can afford it. I'm willing to make some other sacrifices (cell phones, cable, etc) if need be but I am willing to let it go if it just won't work.

[BobMango]

If you are looking at dealer sales forget them and look only at private.
You will find they are less than KBB.

I must be doing something wrong then. I used crazedlist.org to search multiple craigslist web sites, select Cars/Trucks (private party), list F-250, Diesel, 2006, lariat and get back lots of listings on the west coast for prices well north of $20K, like $26K, $31K, $22K, $29K, etc.

I certainly accept that the real price I could sell it for could be less than the KBB, but I can't see having a problem selling it for at least what I owe, which is between $12-13K.