car underwater by 10k

[sadbutinneed]

We have two cars that we stated we would reaffirm on our filing. Now as I look closer at the actual number, we are about 10k underwater on one car. Both cars are fairly new and we were hoping to just keep them, keep paying and not have to worry about applying for a car loan for at least another 5-6 years riding out the super high interest rates.

The car that is underwater is our minivan, used to drive around the family of 5, plus one daycare kid, so if we let it go, we'd still have to replace it with a reliable, minivan type car. We couldn't just go buy a junker. (The other car we have is a Honda Fit which my husband uses as a commuter car)

What would you all do - let the car go and chance getting a decent enough loan (probably need like 15-17k to get something reliable) to replace the minivan? Or hold on to the one we have? Anyone have any luck in talking down the principle on car loans. Ours are both with BoA where we also have a ton of CC debt that will be discharged.

Thanks!

[backtoschool]

How much is the car payment a month? Often trustees and lawyers will not let you reaffirm a car that is that much under water, especially if you have a super high payment. What is the interest rate you are currently paying on the car now?

You could do a 722 redemption on the car and get the car refinanced at its market value, but the interest rates are going to be very very high so , it might end up costing you just as much that way.

[sadbutinneed]

The arty didn't seem concerned. The payment is $504 and it is at a 7%.

[BKDefender]

sadbutinneed:

As a matter of course, I refuse to sign any reaffirmations for vehicles that are underwater just because if after the bankruptcy the client decides they don't want to keep paying on something that is underwater, and it gets repo'd they have a claim for malpractice against me because I know that reaffirming a debt that is underwater is almost always against someone's best interest.

Having said that, if the car payment is not a hardship, then your attorney (or you) can prepare the reaffirmation agreement, file it without the attorney's signature, and set a court hearing with the judge. You'll explain your position why you want to reaffirm the debt even though it is underwater, and if the payments themselves are not a hardship, the judge could grant the reaffirmation.

Also - as backtoschool says, you could do a redemption under code 722. Check out 722redemptions.com. It's a high interest rate (15-20%, sometimes higher) but you can 'buy' the car at it's fair market value and the $10k underwater portion becomes dischargable unsecured non-priority debt just like a credit card.

--William

[sadbutinneed]

If we did the 722 redemption route the in a year we could trade it in and get something used at a lower rate maybe. So even if the payments are the same for that year we could get rid of it down the line?

We owe 25k and kbb says it is worth 15k.

The payment is doable since our other car payment much lower.