Pre-Discharge Car Loan Offer

[jade83081]

I recently got a letter in a mail from a dealership that said I could apply for special financing for a new or used car loan as early as my 341 meeting. Because my current car loan is a little less than half of what I owe altogether (about $50,000) I've been debating whether to let my car go and get a new one. My car is in good condition, but it's upside-down and has no value. I still have about three more years of car payments to make to pay it off and the payment every month is $500.

I spoke with the man at the dealership who sent me the letter and he explained that he had a program set up with two banks that worked specifically with people with bankruptcies. He said essentially the way it works is that the dealership co-signs the loan, which makes it possible to do pre-discharge.

He told me that if I waited to do it after I was discharged, more than likely I would have to reaffirm my current vehicle. He said that at that point I would no longer qualify. The only way to get a car with them would be to trade in my current car and of course I wouldn't do that, because I'd just be tacking on more negative equity.

So my question is, has anyone else ever done this or heard of it? And if so, is it okay to do it? My 341 meeting is on May 9 and I plan to talk to my attorney then, but I was wondering if anyone else had experienced this.

[SinkingFast]

The Dealership is essentially offering a 722 Redemption Loan. 722 Loans are for people who file Ch 7 and have to be processed prior to Discharge. Once you're Discharged, you no longer qualify under Section 722 of the Code.

In your case, the Dealership does not want you to Redeem your current car. The Dealer wants you to surrender your current car and purchase a replacement vehicle from them.

We got several of those offers during our BK, and even after we were Discharged. I don't know if your attny has to approve a "replacement" purchase. But your attny would be part of the Redemption process if you refi'd your current car.

Will you gain anything??!! You just have to put pencil to paper and see. Redemption Loans come with very high interest rates. You'll have to compare the new deal to what you're currently paying to see if it's worth it.

[jade83081]

I wouldn't use the word gain. But I would be able to lower my car payment and owe less altogether. I owe about $16,500 on my current car, and if I went this route, I would be able to finance a used car from the dealership for $7,500.

[pcbuilder48]

I actually just did this on Friday, my 341 is scheduled for July 18. I called my attorney today to cancel my reaffirmation and just surrender the old car that I was upside down in with an apr of 29%. With the new loan they accepted no money down and the apr is 14%, not good but not as bad off as I was before.

[Grizzlyboy]

Who did you finance your car through for 14%

[pcbuilder48]

Prestige Financial, they also drop your apr .5% for every month you pay on time, well something like that.

[CindyLou]

I looked at the website. Looks legit. But did you notice that you can pay your car payment with a credit card???? How funny is that? I guess they want their money not matter what! Did they put something in your agreement that you must reafirm the debt in the BK???

[pcbuilder48]

no I didnt have to do anything with the bankruptcy goes, the bank and the lawyer said it didnt need to be reaffirmed, couldnt tell you the technical term. Best part was No Money Down.