Vehicle Options

[BoxerLover]

Ok, please don't criticize me, but I have a question about a vehicle purchase. We are converting our chapter 13 to a chapter 7, most likely next week (waiting for attorney's secreatary to call with the date). We were going to reaffirm our 2008 chevy impala with 84,000 miles, $499.31/month....since it was included in the chapter 13, trustee hasn't sent full payments so we need to bring it current before discharge for them to do the reaffirmation ($6,600.00) plus the monthly payment of $499.31. There will be 2 years left at that payment amount. My husband and I were out looking around today, and we think we found a good deal on a 2008 Dodge Grand Caravan, 29,000 miles. Looking at a payment of $300.00 for 48 months if we were to do it. In a chapter 13 I know you are suppose to get trustee approval before obtaining any new credit, but since I'm converting to a 7, would it really matter? We are locked into anything, they are just running the numbers to see what they come up with right now. Would I legally be able to surrender my Impala and purchase the Van....or possibly have my parents purchase it in their name, surrender the impala, and then record the "rent" I would pay for the vehicle to them? Just wondering if anyone has been in a similar situation and how they handled it.

[LadyInTheRed]

While you are still in a Chap 13, you cannot get a new loan without court authorization. That doesn't mean you can't fill out an application. You just can't actually take the loan. Once you have converted to a Chap 7, I don't know whether you are allowed to incur debt. But, it is unlikely you will be able get financing until your Chap 7 is discharged.

If you decide to keep the Impala, don't reafiirm unless your attorney can give you a good reason why you should. Reaffirmations are rarely in the best interest of the debtor.

[BoxerLover]

[QUOTE=If you decide to keep the Impala, don't reafiirm unless your attorney can give you a good reason why you should. Reaffirmations are rarely in the best interest of the debtor.[/QUOTE]

My attorney said I don't have a choice but to reaffirm if that is what the finance company wants. I think it's because it is not "current":-( I'd love to not reaffirm it, but Ally/GMAC says I'll have to reaffirm and make up the missed payments within 3 months because of the trustee not sending them enough money and in the 13 it was being crammed down, but they'll want full loan amount....including interest from filing, or they said they'd want the vehicle back. Doesn't make a lot of sense to me, but I guess the ball is in their court if I need a vehicle.

[justbroke]

Ok, please don't criticize me, but I have a question about a vehicle purchase. We are converting our chapter 13 to a chapter 7, most likely next week (waiting for attorney's secreatary to call with the date). We were going to reaffirm our 2008 chevy impala with 84,000 miles, $499.31/month....since it was included in the chapter 13, trustee hasn't sent full payments so we need to bring it current before discharge for them to do the reaffirmation ($6,600.00) plus the monthly payment of $499.31.

Are you converting and using an attorney? Let me tell you this one word... REDEMPTION! There is NO reason to pay the back payments at all! You should only be paying them what the value of the vehicle is in a redemption. Even with a redemption, I can pretty much tell you now that the payment will be less than $499.31 even with a 24% interest rate. (I have never seen a $499.31/month Impala before, so your interest rate must already be high.) I did this with one of my vehicles and kept the same term left on my original loan. Additionally, I just refinanced with Navy Federal (after discharge of course) at a much much lower rate than the 19% rate that 722Redemption (USBank) gave me.

If you do need to purchase (with 722 Redemption or whoever), you can wait until after the Order of conversion, then it doesn't matter. I did not need any permission to redeem my car using a loan through USBank.

Redemption, Redemption, Redemption!

If your attorney didn't mention Redemption, perhaps you should ask him to learn about redemption! It's in the code. There is no so-called 910-day rule. It worked for me perfectly. It is there for a reason.

[LadyInTheRed]

trustee hasn't sent full payments so we need to bring it current before discharge for them to do the reaffirmation ($6,600.00) plus the monthly payment of $499.31.

My attorney said I don't have a choice but to reaffirm if that is what the finance company wants. I think it's because it is not "current":-( I'd love to not reaffirm it, but Ally/GMAC says I'll have to reaffirm and make up the missed payments within 3 months because of the trustee not sending them enough money and in the 13 it was being crammed down, but they'll want full loan amount....including interest from filing, or they said they'd want the vehicle back. Doesn't make a lot of sense to me, but I guess the ball is in their court if I need a vehicle.

I'm confused. Are they requiring you to bring it current before discharge in order to reaffirm or are they giving you three months to bring it current if you reaffirm? Do you have any equity in the Impala before bringing it current? If so, it may make sense to reaffirm and then sell it or trade it in after your Chap 7 discharge.

[BoxerLover]

They said the reaffirmation will state that I have to bring it current before discharge, but it's my understanding if I was default and not have it current by discharge date that they would then repo it and since I would've reaffirmed it, I'd be responsible for any deficiency. No equity right now. After paying them the $8000 between behind payments and current payments, I'd we what it's worth.

I called 722Redemption and they said they couldn't help us because we had two bankrutpcies (with this one), a ch 13 that got dismissed before, then we did this refile 2 weeks later so it shows 2 on our records. I so wanted to go that way. I think it'd make more since to offer them a lump sum payment and see if they'd take it, but they told me nope....maybe if they actually see the conversion papers they'd change their tone. I can hope, right? My interest rate currently is 10.9, I didn't think that was too horrible.

[DAE]

I'm sure the others will point this out, but you are not responsible for the deficiency if the underlying debt is wiped out in the discharge. You're getting bad information.

[justbroke]

You could go back to USBank (722 Redemption) and ask to speak to a supervisor to explain that the case was immediately refiled and it wasn't two different bankruptcies. Redemption is the better option. I would never pay $6K to keep a car with $500/month payments for the next 24 months, when the value of the car is what?

Instead of paying the $6K in back payments, you could take $3K and buy a decent used car. Sheesh, for $5K I've seen some really nice vehicles with around the same number of miles. You'd own it too and have no car payment. I think that we need to think smarter when we are going through bankruptcy.

I'd definitely call their bluff. Tell them to "eat steel", because they would get the car back, with no chance of recovering a penny. My lender was going to do just that. I was a Chapter 13 that converted to a Chapter 7. I was 2 years into the Chapter 13 (almost) and converted. Told the lender that I'd rather give it back than pay to get it current. They accepted and I reaffirmed. I also just refinanced that loan as well with Navy Federal.

You should not even be considering this deal at all. It is not a good deal at all. Tell them to come and get the car since you are not going to pay. As a matter of fact, even if they did allow the loan to "re-amortize" and roll the $8K onto the end... I would still not do it. You have an opportunity to shed $8K of wasted money right this moment.

If your attorney isn't going to fight for you (either because your fee agreement doesn't include fighting on reaffirmation agreements or the attorney just doesn't do those things), then you need to take the fight to your lender. Tell them to "eat steel". I'm 100% serious.

[LadyInTheRed]

They said the reaffirmation will state that I have to bring it current before discharge, but it's my understanding if I was default and not have it current by discharge date that they would then repo it and since I would've reaffirmed it, I'd be responsible for any deficiency.

True. So, if you have to bring it current before discharge to reaffirm, why reaffirm? It makes more sense to not reaffirm, bring it current before discharge and just stay current after discharge.

What makes even more sense is to take justbroke's advice and redeem or let it go and use that $6k to buy a different car outright. Then save the $300 you were going to pay for 48 months and you'll have $14.4k, plus compounded interest to buy a car later.

[Dj1995]

Ok - I'm confused here - we had the same situation - conversion from 13 to 7 - car was in the 13 plan and only 1 payment was made to the creditor for the car. We opted to "retain and pay" but the attorney said that we could just let them come get the car and we would NOT be responsible for any deficiency - is this correct?

[justbroke]

Ok - I'm confused here - we had the same situation - conversion from 13 to 7 - car was in the 13 plan and only 1 payment was made to the creditor for the car. We opted to "retain and pay" but the attorney said that we could just let them come get the car and we would NOT be responsible for any deficiency - is this correct?

That is absolutely correct. FOr all intents and purposes, the day that you convert to a Chapter 7, is like getting another bite at the apple. You basically are allowed to include ANY debt that you created BEFORE you converted! So, a car, home, or any other debt (including unsecured debt like electric bills, other utilities, anything) can be included in the converted Chapter 7.

There is absolutely no reason to be extorted by an automobile lender. The best thing to do is usually to Redeem since you would get the vehicle for the "current" market value (as of the date of the hearing on the redemption). The lender really has no recourse on a redemption... it's up to the Judge to set the price.

[BoxerLover]

Well, I contacted 722 redemption again, they don't think they'll be able to help but they will see. They said I could call back Monday for an answer. They said it'd make more sense for me to let this vehicle go back and do the "replacement" part of their program. I am not holding my breath. I called our current lender and tried playing hardball, they won't wiggle an inch! Even asked to talk to two different managers. Ugh. We will see how this all plans out. I truly appreciate everyone's input.

[justbroke]

They want to "eat steel", so let them! They lose in the end because they'll get "liquidation" or "auction value" for the vehicle and will lose out on at least $7,000 (your arrears), as well as the equity deficiency! Generally speaking, the regular folks in the regular customer service department can't help. It is usually their bankruptcy attorneys (or bankruptcy management company) that makes these deals.

Yes, 722 Redemption does have two programs.

[bcohen]

Even in "excellent" condition--which your car may or may not be--with that many miles, the dealer retail price would be $13k to $18k depending on options and trim level. This means that the $18,583.44 you owe on the car is way more than it's worth, as the private party value would be closer to $10k. If I were in your shoes, no way would I consider reaffirming a car loan that's so far underwater--and with such an outrageously high monthly payment. Heck, around here you can get a decent 1-bedroom apartment with all utilities paid for around $500 a month. So no way would I put that kind of money into a car payment, even if I could afford it.

My advice would be to call the lender's bluff. See if they can do a workout, or otherwise modify the loan to lower the principal to current market value, forgive the arrears, and lower the monthly payment to a more reasonable amount. Or see if you can get a redemption loan on more favorable terms. Otherwise, I'd say to let it go, drive it as long as you can without making another payment, and let the repo man cart it away when the time comes. If they don't want to make a deal with you, it's their loss. At auction, the car will sell for no more than $5k to $6k, and may go for significantly less.

[BoxerLover]

So, I am going to tell the lender to "eat steel". We were able to get a 2008 van with 29,000 miles and payment is nearly $200 less a month and it has a 3 year warranty! Thats what they get for not working with us. I'll store the car in a storage shed until they call to pick it up. I called our attorney and left a msg that we are going to want to change our statement of intentions to surrender instead of reaffirm. The secreatary made it sound like this wasn't a big deal, no matter what it says so long as I just don't sign a reaffirmation.