Is it okay to reaffirm a car note?

[kimw8083]

We owe a good bit still on the truck and we want to keep it..so I was under the impression the only way to keep it is to reaffirm on it!

[AngelinaCat]

Kim, that still depends on your local situation: court, trustee, local rules, lender policies, etc. But if you are current with your payments, and can remain current with your payments, you should be okay.

[btbeme]

You have but two things to worry about...

1. What will your lender do if you don't reaffirm. Only your lender can answer that question.
2. Can and will you make the payments afterwards? Only you can answer that question.

Now, if your district, Trustee, or lender require a reaffirmation to be entered, that does NOT necessarily mean that the reaffirmation will be CONFIRMED. Debee's earlier (first) answer is thorough.

[debee]

Succintly put, btbeme.

I don't know where the misunderstanding about trustees and districts comes from. The district and/or the trustee can't compel the lender to repo. And they can't compel the debtor to reaffirm.

The whole thing rests between the lender & debtor.

[mwr]

It's not that some jurisdictions compel reaffirmations, but that some jurisdictions still, post-BAPCPA, permit ride-through (with no creditor option) with no reaff entered and some ("my" 9th Circuit) don't. Here in the 9th we have to either rely on the practice of the lender to allow ride-through (and some don't allow that) or enter a reaff agreement. But if I don't sign the agreement for my client, the court will review it and probably (if I-J is negative) not approve it and still prohibit the lender from repoing if payment are current. But that also varies with jurisdiction. Anyone wanting easy answers "in general" better try another subject instead of auto reaffs.

[debee]

Yeah, I know about backdoor ride-thru, mwr. I posted a lot on the topic some few months ago.

But there have been posts on the forum over the past few weeks which suggest that there is variation in terms of when/if reaffirmation is required. It's important for forum members to know that it's not.

[mwr]

Agreed that reaff is never "required". Reaff is a very slippery subject...

[debee]

There's been a lot of talk on the forum in recent weeks about personal property ride-thru, and backdoor ride-thru along with the mistaken presumption that everyone is protected from repo if the court denies their reaffirmation agreement. This isn’t true. Long post for people who care to know:

It’s misleading to say that some districts allow ride-thru. It’s the lender that allows it. In fact, since BAPCPA in the cases where debtors wrote “retain and pay” on their SOI as if it were the fourth option after “reaffirm, redeem, or surrender” and it got to court because of issues with the creditor, every court in the country (lower courts, BAPs, and Circuit Courts) has ruled the same way: the fourth option is dead.

If the SOI was filled out using one of the three options listed in the code (and either the reaffirmation was executed and timely filed, or the bank failed to send a reaffirmation agreement), some lower courts in the 3rd, 4th, 9th and 10th circuits have ruled in ways that allow the debtor to keep their collateral so long as they remain current thereby making a “backdoor ride-thru” possible.

Pre-BAPCPA, the 1st, 5th, 6th, 7th, and 11th circuits didn't allow ride-through. I’ve never heard of a backdoor ride-thru case coming out of any of these circuits. It would be a mistake for anyone living in one of these circuits to assume they would get a backdoor ride-thru because someone in the Northern District of California got one.

All of the backdoor ride-thru cases are lower court decisions in the circuits that previously allowed ride-thru (2nd, 3rd, 4th, 9th, 10th). It’s important for debtors to note that the decisions are all lower court because while persuasive, they're not binding on other judges. In fact, even in the same district, they’re not binding. It's not guaranteed that all the judges in one district will rule the same way.

What’s more, much depends on the specifics of the case. There are many cases where the reaffirmation was denied not only because of "undue hardship" but also because the car was a luxury brand. In one case, the judge denied the reaffirmation without offering the debtor any protection because of the timing of the purchase, (the debtor's previous vehicle was only two years old). One case the judge denied it because he said the truck, although not a luxury brand, was worth 27K when new and that was excessive and unnecessary. And in another, the judge denied it because of “undue hardship” and was openly asked by the debtor to stipulate that the creditor could not repo the car and the judge refused. A denied reaffirmation doesn’t equal a backdoor ride-thru.


Note: The 8th Circuit never decided the issue pre-BAPCPA and its lower courts were divided. Post BAPCPA, the lower courts have eliminated the fourth option (same as everywhere else), and there have been two cases of backdoor ride-thru, both in MO. edit to add this: there may be some newer cases out of the 8th. My research was done in late Fall, '10.

[DAE]

debee, great post.

All, having looked at this issue in depth (with debee's assistance), I've discovered that the most dependable way to do a ride-through is to have a lender that will allow it. If the lender opposes a ride-through, getting one is a long shot unless you live in an area covered by the 3rd, 4th, 9th and 10th circuits ... and even then it might not work. So, talk to your lenders. With some exceptions, most are willing to keep taking your money and happy to avoid repossession/resale.