Question regarding vehicle-to reaffirm or not?

[TheBrokeCouple]

First and foremost...let me say a big Thanks for all of the advice we've been given so far, you all are great!

Here's the question.

We live in Indiana and have decided to file after we file our taxes and have our roof stripped and shingled. That will be sometime in February.

We have a 2005 Town & Country van that we owe 25000 on, and will have to pay on for 5 more years at 8.6% interest at 434.00 per month. The kelly blue book is at about 17000 ( I already scraped the side of it..**sigh**)

We would be better off regarding our budget each month if we let the van go, and bought something else cheaper.

1. what would be the best process for that? how quickly can they reposses your vehicle vs taking it in a bankruptcy? Our loan is with Teachers Credit Union, in South Bend

2. if our credit scores are already crappy 603 & 628, and our debt to income ratio is too high...would we even be able to qualify for something else with a lower payment?? Buying something with cash is no option, as we have no savings, 401k or anything...we, like many others, are living check to check..

3. We absolutely have to have two vehicles...we're just trying to see what our options are. Could our lender be forced to lower the amount we owe..but if the interest rate goes sky high, the payment would not work for us anyway. I've read about something like this before?? I'm just not sure how that works.

Thanks so much for any help that you all could offer.

TheBrokeCouple

[chpxiii]

I realize you're talking about getting rid of the van. But here is a possible option for you in order to keep transportation.

If you want to keep the van as transportation, you would end up in a chapter 13 for sure where you would make payments towards the van through your trustee. If you have had your car for a certain amount of time by the time you file (someone fill in that time for me, please, I don't know it off hand) you could do what is called a "cram down" on the vehicle.

Depending on how it is done in your area depends on what you use to value the car. For me in Dallas, TX, we used NADA to get the value of my car. I still owed over $21k on my car. It was "crammed down" to $16k and some change. I then paid off the note to my car through my trustee.

Here's a down side: I should have had my car paid off in 2006. That payment to my car got stretched out to Aug. 2008 at an 8% interest. I have not done the math, but I suspect I ended up paying MORE THAN what was owed had I simply made the regular payments. (Part of my story is that I *needed* to keep the car, and the car payments at the time were KILLING me.)

The benefit to doing this is that it may lower your car payment. My car payment was lowered CONSIDERABLY. I was able to keep my car as a result. i.e. the car payment was no longer a burden to me. I ended up paying more, I believe, in the long run but at the time I REALLY REALLY needed the reprieve of the protection from the courts and a lower car payment.

If you can do a cram down, that would really depend on what your attorney says to use to value the car, the interest rate, and how long your payments are. You may end up paying more, but you may be able to atleast keep the vehicle with lower payments until you can get something better. This is a "cram down" and I think this is what you are referring to.

PS: One of my best friends from high school currently lives in Niles, MI (I hear it's close to south bend) and my boyfriend is an alumni of Notre Dame.

[TheBrokeCouple]

We absolutely want a chapter 7 if we can at all have one. We want to be left with as little debt as possible. Does this mean we have no choice about losing our van?

TheBrokeCouple

[jec]

are you over the median income in your state?

Dont get caught in having to list that vehicle as secured debt and then surrender it.


There is also something called 722 redemption

that is when they offer your bank what the vehicle is worth and you finance it thru them (24% interest but if you make all your payments on time they will refinance you to a better rate after 1 year)