Reaffirmation question

[cismith54]

Got some confusion on reaffirmation process. I co-signed on an auto loan for my son (he makes the payments). My husband and I filed Ch 7 12/3/09. The bank has sent a reaffirmation agreement that sounds really good. My son wants to pay off the full amount instead of monthly payments. Is that something that can be done or does it have to be installments? Or are there any actual rules on this?

[justbroke]

If you're son is going to pay it off, then you should not raaffirm the vehicle. I don't see why you'd reaffirm it anyway, if the car is technically your son's and he is paying the note. By not reaffirming, the liability for payment would switch to your son, as he's the "non-filing" co-debtor. Your son should contact the lender and inform them that he wants to payoff the loan... or he could keep paying. Just make sure your son stays current if he's keeping the car.

By the way, when was the car purchased?

[cismith54]

The reaffirmation amount they proposed is about $4,000 less than what is presently owed on the vehicle. It is also upside down. Yes, technically it is his vehicle but my names is still on the contract. At the time, he would not have been able to qualify without me. I thought if I refuse to reaffirm that would leave him with the entire balance due? If he should default, I would be responsible. We purchased it about 3 1/2 years ago. I just want to make the right decision for all.

Thanks
- Show quoted text -

[justbroke]

I thought if I refuse to reaffirm that would leave him with the entire balance due?

Correct.

If he should default, I would be responsible. We purchased it about 3 1/2 years ago. I just want to make the right decision for all.

If he should default and you had reaffirmed, you would be responsible.

Since the car was purchased 3.5 years ago, you should be redeeming the car! That's why they offered it with $4K less because that's the fair market value of the car!!! (This is known as a car that is not subject to the 910-day rule.) If your son has the money, you should probably change your intention to "redeem" and pay the car off at fair market value.

Are you working with an attorney?

[cismith54]

Since the car was purchased 3.5 years ago, you should be redeeming the car! That's why they offered it with $4K less because that's the fair market value of the car!!! (This is known as a car that is not subject to the 910-day rule.) If your son has the money, you should probably change your intention to "redeem" and pay the car off at fair market value.

I guess I'm confused. The bank sent it as a "reaffirm", I guess because that is what my son wanted to do. Now they have offered it at $4000 less, I was concerned that they would want the balance due on the loan instead of $4000 less. I will be talking to my attorney tomorrow about this. Just as additional info about our BK, we filed 12/3/09 due to my spouse's layoff. Our 341 was 12/31/2009. The same company that laid him off offered him a position which forced us to move from ID to VA. He started with them 01/18/2010. Luckily for us they paid all moving expenses. I am not aware of the 910-day rule. What is that? So with my husbands new job can the trustee force us into a Ch 13? I understood my attorney to state that the date of filing determines the Chapter unless the means test is flunked. We passed the means test with flying colors. I've done some reading on the forum that now makes me concerned about this issue. Any info that you can share on this will be greatly appreciated. I also wanted to use Pacer but my attorney told me not to worry about it. Confusion!!!

[justbroke]

Yes, confusion. If they offer reaffirmation at $4K, and your son actually has the money, then you might reaffirm and immediately payoff the loan, but you'd need to understand the terms of the reaffirmation first.

I would seriously work with your attorney on your best option. I don't want you to end up reaffirming and being responsible for the car! The 910-day rule is that you can redeem a vehicle for "current market value" if you purchased it more than 910 days before filing!

[albacore44]

Yes, confusion. If they offer reaffirmation at $4K, and your son actually has the money, then you might reaffirm and immediately payoff the loan, but you'd need to understand the terms of the reaffirmation first.

I would seriously work with your attorney on your best option. I don't want you to end up reaffirming and being responsible for the car! The 910-day rule is that you can redeem a vehicle for "current market value" if you purchased it more than 910 days before filing!

Hi JB,

it was my understanding that the 910- day rule only applied to a Ch-13 cram down. Correct me if I'm wrong.

One of my vehicles in my filing has a balance of $9k, but my thinking is that it's worth more like $4K in this economy. i was planning on offering GMAC $4K lump sum after discharge.

My attorney marked my statement of intentions as "Retain, Keep current". that was my plan, as i wanted that payment included in my expenses, so as to ensure a Ch-7. So now i'm thinking it would be stupid to keep paying on an upside down vehicle

so any strategies you might have for negotiating this down to market value, i'm all ears.

Thanks

[justbroke]

it was my understanding that the 910- day rule only applied to a Ch-13 cram down. Correct me if I'm wrong.

Yes, it's in 11 USC 1325 I think, so it would be a Chapter 13 thing only. I need to keep my Chapter 7 and Chapter 13 posts straight.

I should have written "redemption" instead of 910-vehicle. Redemption is the manner in which Chapter 7 debtors cramdown vehicles. However, it requires a lump sum payment or a new loan. What the original poster is being offered is very much like a redemption loan, since the creditor is reaffirming it at market value.

So now i'm thinking it would be stupid to keep paying on an upside down vehicle

If you can redeem it... then it could be a better option. I don't know of any strategies other than seeking a redemption of the vehicle. The original poster here indicated that the creditor automatically reduced the principal down to market value on the reaffirmation. That is interesting.

[albacore44]

Yes, it's in 11 USC 1325 I think, so it would be a Chapter 13 thing only. I need to keep my Chapter 7 and Chapter 13 posts straight.

I should have written "redemption" instead of 910-vehicle. Redemption is the manner in which Chapter 7 debtors cramdown vehicles. However, it requires a lump sum payment or a new loan. What the original poster is being offered is very much like a redemption loan, since the creditor is reaffirming it at market value.

If you can redeem it... then it could be a better option. I don't know of any strategies other than seeking a redemption of the vehicle. The original poster here indicated that the creditor automatically reduced the principal down to market value on the reaffirmation. That is interesting.

Ahh, yes, i can see "redeem" under statement of intentions. however, the box "other" is checked. I guess i can just approach GMAC and offer up the lump sum. don't see why they would not take it as cash is king right now.

[cismith54]

Now I have concerns about the timeframe on this. The offer from the bank states within 60 days of my 341. The 341 was 12/30/2009. Another site states 45 days from 341. I just received it yesterday which is already at possibly the 45 days timeframe. Is is calendar days or business days? Does my son have to sign it as well as the co-signer? I now live it VA and he lives in ID which causes some problems. Any ideas?

[justbroke]

You must take action on your "intention" within 45 days of filing. Since you already contacted the bank, the ball is rolling and you are acting on your "intention". Now, the Bank requires the 60 days post-341 Meeting because that is the last day to object to the dischargability of a debt, and is basically your "discharge" bar date. Basically, everything needs to be sorted out before that "discharge" bar date!

So long as the re-affirmation has been submitted to the court prior to the "discharge" bar date (60 days post your 341 Meeting), you would be okay.

Your son cannot sign it, since this is a Re-affirmation between you and the Bank, not your son and the Bank. Your son's liability is still there regardless of whether you sign that or not.

It is calendar days.

[albacore44]

You must take action on your "intention" within 45 days of filing. Since you already contacted the bank, the ball is rolling and you are acting on your "intention". Now, the Bank requires the 60 days post-341 Meeting because that is the last day to object to the dischargability of a debt, and is basically your "discharge" bar date. Basically, everything needs to be sorted out before that "discharge" bar date!

So long as the re-affirmation has been submitted to the court prior to the "discharge" bar date (60 days post your 341 Meeting), you would be okay.

Your son cannot sign it, since this is a Re-affirmation between you and the Bank, not your son and the Bank. Your son's liability is still there regardless of whether you sign that or not.

It is calendar days.

So that said, when would be a good time for me to start negotiation with GMAC ?? i'm 20 days past my filing date,and as i understand it GMAC should not be able to talk to me with the stay in place. What do you think ??

[justbroke]

So that said, when would be a good time for me to start negotiation with GMAC ?? i'm 20 days past my filing date,and as i understand it GMAC should not be able to talk to me with the stay in place. What do you think ??

Well, your intention was to "retain and pay". You really need to talk to your attorney to see if there's another deal to be had. Unfortunately, the big automobile companies (GMAC, Ford Credit, Honda Credit) don't seem to make deals, that I've read about. Ask your attorney to offer them a deal on reaffirmation at market value?

[BobMango]

So that said, when would be a good time for me to start negotiation with GMAC ?? i'm 20 days past my filing date,and as i understand it GMAC should not be able to talk to me with the stay in place. What do you think ??

They won't call you, but you can certainly contact them. I called my credit union just after filing and asked what we could do. They agreed to drop my payment by $235 a month and advance the loan so that I was no longer past due. They had the agreement ready to go at my 341.