Repossessed car after discharge

[mewmadison]

Here's the set-up:

My wife and I filed for Chapter 7 shortly before the big deadline in October. While going through the bankruptcy, we chose to surrender a car, and re-affirm on another. On the day before we filed, my attorney had me call a redemption financing place to see if we would qualify for lower payments and a lower payoff amount. We did, and the gentleman at the redemption financing place told me to play the waiting game because they needed to secure the title. He let me know that it would be 3-4 months.
Everything went off without a hitch (seemingly) and we went through our 341 meeting on Nov. 17, 2005. At the 341, my attorney mentioned that she could not find any record of our re-affirmation of the car that was not surrendered, and to get in touch with her over the next few weeks to get it straightened out. December came and went without so much as a return phone call or email from her. My wife and I both tried several times to get in touch with her to no avail. Since I did not hear from my attorney, it was my assumption that the re-aff was not necessary and I would just be getting something from the redemption financing company stating that I owe a monthly payment to them.

here's where things get interesting. We were discharged on 01/19/2006. Last night (01/30/2006) we got a knock on the door from a man who asked if we wanted a chance to get our belongings out before he took our car. Absolute humiliation and sheer panic set in. I called the redemption financing place and he let me know that he had prepared the proper paperwork and sent it over to my attorney for processing with the bankruptcy paperwork back in October. I called Mitsubishi (holder of the lien) and they said that I was $2500 past due and had not made a payment in 155 days. Nothing they can do. So this morning, I'm on pins and needles awaiting a return phone call from my attorney.

Tons of questions come out of this: Did I do something wrong? What are my options when it comes to the car? Can I get it back, or would it be wiser to just let it go and buy something else? If this car sells at auction, I am not liable for the difference in the balance owed and what the car retrieves at auction am I? The other car that was surrendered was sold at auction and the amount owed was discharged in the bankrupcy. Is that what happens now?

Thanks in advance for all advice/help.

[bkfiler]

well it seems that this car went through like as if it was listed in the bk as surrendered. if so then you dont owe on it.

if you signed anything with your attorney, or the court or redeemption place then you better find out if you should have been making payments. if thats the case then you are responsible for the new loan. it sounds like none of this took place but i wanted to warn you anyways.

im not sure why you let this go. you need to stay on top of your attorney. they cant be trusted.

also, its your responsability to make sure someone gets the payments. even if they dont send you the bills.

what to do? call your attorney but get ahold of her this time.

[mewmadison]

my attorney just called to let me know that she had called the court and let them know that we wanted to redeem this property. she also mentioned that the lienholder jumped the gun by repossessing this car. is there something we can do legally to the lienholder for wrongfully taking a car? i don't know if i even want to bother with it, but the question was at least worth asking.

[StaciMM]

If the redemption didn't get signed & entered before discharge, there probably isnt much you can do unless Mitsubishi is willing to work with you-maybe move the missed payments to the end of the loan or something.

Seems that your attorney dropped the ball-when he commented about the reaffirmation, that was a good indication he had forgotten about the redemption. (You wouldn't both reaffirm AND redeem, just one or the other.) If you were going to reaffirm, you would have needed to keep your payments current during the BK process. Not sure why they told you it would take 3-4 months... They should have told you that they couldn't really start until after you filed-can't redeem if you're not 'in' chapter 7. Paperwork would have been needed, a motion filed with the court, and possibly a hearing. Then you would have needed to sign loan docs.

Regarding the vehicle-if you didn't reaffirm, then yes-you owe nothing. And even if you DID reaffirm, you could cancel it within 60 days of signing it or within 60 days of discharge. (Which ever one gives you more time.)

If you were upside down on it, and past due by $2500, you're probably better off trying to get into a used vehicle and letting that one go.

[StaciMM]

If it happened after discharge, the lienholder didn't do anything wrong. Discharge ends the automatic stay.

IMO the attorney knows they screwed up and is trying to make it look like they'll fix the situation. Telling the BK court 'I meant to turn in a motion for redemption but forgot' doesn't carry much weight, I'm guessing. He
might possibly be able to get the case reopened to do the redemption-you could ask about that.

my attorney just called to let me know that she had called the court and let them know that we wanted to redeem this property. she also mentioned that the lienholder jumped the gun by repossessing this car. is there something we can do legally to the lienholder for wrongfully taking a car? i don't know if i even want to bother with it, but the question was at least worth asking.

[bkfiler]

my attorney just called to let me know that she had called the court and let them know that we wanted to redeem this property. she also mentioned that the lienholder jumped the gun by repossessing this car. is there something we can do legally to the lienholder for wrongfully taking a car? i don't know if i even want to bother with it, but the question was at least worth asking.

you were discharged. the stay ended. they can pick the car up anytime they want to.

if you attorney trys to fix this for you make sure you dont pay the reopening fee. there are other costs to dealing with a redemption however. that you should pay for. reafirrming usually doesnt cost much if anything at all actually at least for credit cards. a car might be the same way.

[mewmadison]

The attorney mentioned that she thought i could get the car back without any money, because the case has been discharged but not closed.

Great point about redemption and reaffirmation, i didn't realize there was such a fundamental difference in the two.

SHe also mentioned that she had talked to the guy at the redemption financing place (722 redemption) and said that he didn't need anything else. i guess where i'm confused is why they (722) would have told me not to worry about payments, since they would be taking over. it's not that i COULDN"T make payments, because i was completely able. i didn't make them because he had told me that they would be acquiring the title, and there should be no reason to pay mitsubishi extra money that will not go towards the principal. if the redemption had been processed as part of the bankruptcy stuff, would i have had to continue to make payments?

[mewmadison]

there are other costs to dealing with a redemption however. that you should pay for. .

what costs would these be, and how much am i looking at?

i talked to the repo guy and said if they made a mistake he would gladly waive the fees associated with picking up the car. however, i don't see where he really made the mistake. i think my attorney screwed up, so i don't think it's right that i have to pay this...??

[StaciMM]

If you were redeeming, it wouldn't make sense to keep paying the old lienholder as your attorney would make an offer to the lender (and they would likely counteroffer) to do the redemption. The agreed upon redemption amount would be based on what the car was worth-not what you owed. If you paid another payment it wouldn't change the value and therefore not lower the redemption price, so your payment would not be applied to the amount you would redeem-it would be like sending out $300 on a credit card and then filing BK on it.

722 Redemption would then issue you a loan, usually including some fees for them & whatever your attorney charged for doing the redemption, and write a check to the original lienholder. At this point, you would no longer owe the original, you would owe 722 Redemption (or their lender, likely US Bank).

Once the redemption loan was funded, you would start making payments on the new loan. (Likely the 1st payment would have been 30 days after it funded.)

The key point might be that 722 is not taking over your old loan, you're buying the car from the original creditor for what its worth, and 722 is loaning you the money to do so. Its ending one credit agreement and starting another.

[StaciMM]

Most attorneys charge something for the process, I've seen $200-600, and that is normally included in your 722 loan. If you look back at the agreement you signed with your attorney, she probably outlined some examples of 'extras' and what they would cost.

what costs would these be, and how much am i looking at?

i talked to the repo guy and said if they made a mistake he would gladly waive the fees associated with picking up the car. however, i don't see where he really made the mistake. i think my attorney screwed up, so i don't think it's right that i have to pay this...??

[bkfiler]

so why dont car companys tell you which one they will let you do?

if i was the car company id say well the balance is higher then its worth you have to reaffirm.

or if it was a lower balance then the car was worth id say 'well you have to refinance it and buy it at the higher rate'.

how are these two options dealt with by the original car company.

[StaciMM]

Redemption can't be denied by the lender-though they can try to get more money by claiming the value is higher. Redemption is basically a right of someone filing bankruptcy. The lender can try to argue over the value-and since there are several 'resources' for car valuation I would imagine they always try to get more than originally offered. In the end, if the attorney & lender can't work it out-the trustee gets the final say in the matter.

Just like a lender can't make you reaffirm if you want to surrender. Of course, it is up to the person filing BK to find the $$ to redeem, and that is why 722 redemption is around. They are one of a very small # of companies that do redemption financing.

so why dont car companys tell you which one they will let you do?

if i was the car company id say well the balance is higher then its worth you have to reaffirm.

or if it was a lower balance then the car was worth id say 'well you have to refinance it and buy it at the higher rate'.

how are these two options dealt with by the original car company.

[bkfiler]

ok so im starting to understand that portion of it now. thanks.

- you say 'cant be denied by the lender'. what happens if the price isnt right? you cant force them to take the deal. maybe in the end the judge sets the price if it cant be worked out via the even trustee? seems to me that the car company has the right to not sell it unless they want to. it would be sort of a property confiscation of sorts if they got a sucky. probably doesnt happen so much to where they car company gets ripped off bad too often.

- why do we HAVE to have the attorney do it? thats a lot of extra money for something that seems straight forward except for the haggling. and a judge could set the price if need be. sounds like a scam to me.

- again, why would someone go a reaffirmation route? isnt redeemption on cars always better due to loose of value so quick for autos?

[StaciMM]

The idea behind redemption is that if the lender gets the car back, they are not going to be able to sell it for more than 'fair market value' so by getting 'fair market value' from the person filing BK doesn't hurt the lender in any way. In most cases, my guess is it helps them. I don't think they even get FMV at auctions...

I *think* the trustee gets the final word on arbitration, don't know for sure-it might go to the judge.

From when I talked to 722 (keep in mind, I didn't redeem but got a replacement vehicle so there was no dealing with an original lender) it was my understanding that they won't work with someone unless an attorney is involved. That is because they are not setup or qualified to give legal advice-and in alot of situations, legal advice IS needed in order to advise the person whether or not they want to do a redemption, and to compare it to other options. (Reaffirmation, surrender, etc.)

If someone is upside down-the benefit to a redemption loan is that even with a high APR, and the fee of setting the loan up & attorney fee, the end result is paying less than you were scheduled to pay to the OC to pay the original loan off. And, it often lowers the payment ($250-300 is typical) which can help someone on a strained budget. And, if you're able to pay extra, you save alot on interest.

Reaffirmation would be good for someone who was closer to the end of their original loan, as they would be less likely to be upside down. It is also good for someone who A. has bad history with US Bank (that is who finances 722) or B. has a short job history. 722 redemption generally requires a stable job history, and I'd imagine they wouldn't want to see excessive repos. While it isn't credit based so much, they want to see stability.

[bkfiler]

ok that all makes good sense to me. thanks.