"Redeem" Motor Vehicle

[LimpDisc]

Anybody had any luck redeeming a car with a Chapter 7? We have a car payment that we need to keep to pass the means test, but were upside down by about $4,000.

My research shows that this can be done in Colorado. Looks like we just need to get the creditor to go along with redemption. I don't see that being a problem because the lender will lose more money if we decide to surrender.

What are your thoughts?

[downsized]

We tried to redeem a car that we were $4000 upside down on. No no for us. The best they could do was $100 more per month than we pay right now but the length of the loan was less. Under different circumstances we may have gone for it but it wasn't going to work with our unemployment situation. Can't afford the extra $100 right now.

[aljohnson007]

The most simple way is to say on your Statement of Intention that you will reaffirm the car. You can change your mind and the statement later on if you want. In any event, if you are contractually liable for the payment on the day you file, you can claim it. There are several threads on this subject.

[LimpDisc]

Anybody know the approximate cost for your lawyer to file a Motion for Redemption of Collateral? I'm just guessing that there must be additional charges.

Thoughts?

[Gillsbroke]

Got letter from Chrysler wanting me to reaffirm...car upside down by $10K did not think it was worth it....need car for my business. Did not reaffirm and received letter one day after the discharge that I was in default. No late or missed payments ever. Decided to look into 722 redemption after the discharge and made a fast decision to try to get a new vehicle instead. Credit was good prior to BK no late/missed payments just tons of debt. Was approved for new car loan at rate 2.25% higher than going rate. Picking up new car this week...monthly payment going down by $150/mo. and they will report to the credit bureaus! On my way to re-establishing my credit.

[LimpDisc]

What happens if neither side can agree on the redemption? We will choose the redeem option on one of our vehicles, but we will need to see terms & conditions of the deal before agreeing. If we don't like the T&C's can we just change to surrender?

[Gillsbroke]

Yes you should be able to surrender if you do not like the T & C. Redeem is not the same as reaffirmation. With reaffirmation you agree to the old debt and to continue to pay. In exchange for that you get notices of when payments are due, reporting to the CB and late notices should you not pay. If you redeem, it is like getting a whole new note....you renegotiate the amount, terms, etc. You do not have to take the deal. There are companies that will negotiate a 722 redemption for you if you like...they do get a fee for doing so. If you are a good negotiator you may want to try to do it yourself and save the fee. US Bank has a 722 Redemption program....they claim to be able to get your vehicle down to 115% of value. You may be able to do better than that on your own. Don't sign anything without letting your attorney review it....remember that you cannot do another BK for a long while if you get yourself in over your head!

[LuciluS]

Since nobody responded to by thread I'm going to piggyback off this one. If you state your are going to reaffirm a loan do you have to be current on the loan.

Our payment is due 9/17, late on the 27th and will be filing on 9/30/09. Meeting with the Attorney on the 24th to finalize papers after hiring him last Sept. He has a new Paralegal, & she didn't know the answer.

Because we will not get a 'Fresh Start' due to both of us being medical walking patients...no joke either, and are in the hole over $1,000 a month (thank goodness for a large tax refund last year & a $5,000 lawsuit on a auto accident in 3/05 which caused me to be 100% disabled), we decided today we cannot afford the pymt of $438 a month.

US Bank is doing the 722 redemption program & our loan is with them. They said the 722 was only for new customers & I've heard of only one other company in Cinnccinati, OH doing the redemption and many complaints on them.

[bkmaggster]

Since nobody responded to by thread I'm going to piggyback off this one. If you state your are going to reaffirm a loan do you have to be current on the loan.

Nope! You can be behind on payments. We got a redemption offer on 1 car that was 4 months behind and one car that was 1 month behind.

The redemption loans have terrible terms though. We decided we were better off letting the cars go and buying a beater with cash.

I know your car is modified for your needs, though. So you can get a redemption loan even if you are behind.

[LimpDisc]

Nope! You can be behind on payments. We got a redemption offer on 1 car that was 4 months behind and one car that was 1 month behind.

The redemption loans have terrible terms though. We decided we were better off letting the cars go and buying a beater with cash.

I know your car is modified for your needs, though. So you can get a redemption loan even if you are behind.

Could you post the APR they offered you?

[bkmaggster]

Could you post the APR they offered you?

Sorry, we didn't even get that far - they told us the monthly payment amounts and we just about fell over and said "no thanks!" ...I'd guess around 24-25% given the $ and term length.

[Gillsbroke]

You may do better with a new loan for either a new or used car. I got a 6.75% rate on a new car 2 weeks after discharge. I did put down 25% on the new car...but payments are reasonable and I know I will not get stuck with repair costs. The repair costs on an older clunker can eat you alive....especially if you have to take the money out of the monthly budget. Remember that you will not have credit cards for a while so think about what you would do if your car needed a major repair. I could not afford to pay several thousand dollars for a clunker and then have something major go and need to pay more to have it fixed. With a new car, I put the same money down I would have bought the clunker with and I will not have any repair costs as the car came with a bumper to bumper warranty.

[Never_Again]

You may do better with a new loan for either a new or used car. I got a 6.75% rate on a new car 2 weeks after discharge. I did put down 25% on the new car...but payments are reasonable and I know I will not get stuck with repair costs. The repair costs on an older clunker can eat you alive....especially if you have to take the money out of the monthly budget. Remember that you will not have credit cards for a while so think about what you would do if your car needed a major repair. I could not afford to pay several thousand dollars for a clunker and then have something major go and need to pay more to have it fixed. With a new car, I put the same money down I would have bought the clunker with and I will not have any repair costs as the car came with a bumper to bumper warranty.

Or, you could buy the "clunker" as you put it, and establish a savings account, putting the money for the monthly payment in there. You pay for repairs, as needed, out of that account, and accumulate extra in there towards the next vehicle. In most cases, and especially if you buy correctly, you will never overdraw that account, and will probably accumulate enough to buy the next vehicle when it is time.

Everyone has their own decision making process, but it has always amazed me the people who will pay $300, $400, even $500 or more per month, but are just totally paralyzed by the thoughts of a $1000 car repair. That is only two months (or three months) payments.

With the account that I mentioned, you shouldn't even need the credit card. It is time to get away from that mentality of "I have to have a credit card in case of emergency." You don't.

Your bumper to bumper warranty will be 3 years/36,000 miles (I know, some powertrain warranties are longer.) Then you may have to pay for repairs. If you have a 3 year note, you are in pretty good shape. If you have a 5 or 6 year note, you are then in the position to possibly have to pay for repairs, as well as pay for the note.

[Gillsbroke]

Never Again, you are correct about the issues associated with the loan and the length of the loan vs. the warranty. I also agree with you about putting the money you would have paid towards the car note into a savings account to pay for future repairs. This all works as an alternative provided the vehicle does not have problems in the first few months. By the 4th month you certainly would have enough money saved for some repairs, it may take a little longer for a major repair but it certainly is an alternative.

There are other factors in my decision to get a new car rather than a "clunker" which have to do with my line of work. I use my car as my office, and take my clients in my car on an almost daily basis. A clunker would not give the impression I want to give to my clients. When your vehicle is a major part of your business and a "marketing" tool, other factors must be weighed. Additionally, I cannot be a day without a vehicle as I would be out of business for that day which is another reason for the need for a reliable vehicle. Without a credit card I am not be able to rent a car while the 'clunker' is being repaired which was another major consideration.

I know that the new vehicle was the right move for my situation....the vehicle that I was paying was $160 more per month than my new car. I will use this additional savings to pay the new vehicle off faster so that when I get to the end of the warranty I will have no loan and a newer car. I will also build back my credit faster with a new loan payment.

One of the things that everyone forgets about when considering a vehicle without a loan vs. one with a loan is that installment loans are one of the fastest ways to rebuild your credit if they are paid on time. If you go out and purchase a vehicle without a loan it does nothing to help rebuild your credit. I find many people are terrified of credit after BK, but there will be times in your life where you will need or want a loan. It is important to rebuild your credit so that you can get the credit that you may need to achieve your life long goals, such as homeownership, education, etc. Credit that is well-managed is not a bad thing.