Questions About Reaffirming Motorcycle

[layton87]

My husband has filed Chapter 7 bankruptcy, we have our 341 meeting on the 31st next week. He plans to reaffirm his motorcycle, which has a balance of about $8,000 and is worth max $4,585 (what a used dealer would ask for an excellent condition bike, which it isn't).

How how does reaffirmation work exactly at this point? When do we need to address it and where do we go from here? How do we negotiate for the current value and not the existing balance? Is it possible to get a lower interest rate? The interest rate is currently 27.99%.

Do we need to attend a separate court hearing for the reaffirmation? Does the process go through our attorney or do we speak to the creditor? Is this addressed at the 341 hearing?

Thanks in advance! Nervous about the whole process but I've been reading the posts here for many months.

[btbeme]

Let me state it as bluntly and clearly as possible: Your husband's plan is absurd.

Should he come to his senses, he can continue to pay the payments while hoping to negotiate the loan terms with the finance company post-discharge.

Any other consideration ought to draw a loooooong sigh and an argument from your attorney.

[keepsmiling]

.... I've been reading the posts here for many months.

I dunno.... this comes up a LOT, and no one here would ever advise a reaff under these circumstances

Besides which, no judge is gonna sign off on it. So.... fuggedabout.

[AngelinaCatHub]

I agree with the above responders. DO NOT reaffirm. 8K left on a junker worth 4K ? Not smart at all. Negotiating in any way to lower the interest or principle may obligate you to a new mortgage which may threaten your BK and is not allowed and/or may lock you into that new obligation legally.

It is common belief around here, not to reaffirm anything. The banks want your money and will allow you to keep the item. As foolish as it would be to keep that upside down bike.

I will say what another said, bluntly: Your hubby is not thinking responsibly if he is in trouble enough to BK7 but wants to keep his toy. Only my opinion. 'Hub

[keepmine]

A reaffirmation does not occur at the 341.
Both your lawyer and the bk judge assigned to your case must approve a reaffirmation and must be convinced that it is in your best interest. There is no wayy reaffirming a debt that is twice the mkt value of the bike at 27.99% interest is in your best interest.
If he really wants to keep the bike ask your lawyer about 722 redemption financing. Here, a lender will be forced to accept market value and the new loan {from another lender} will still carry a skyhigh interest rate.
Here's a site that may help. www.722redemption.com
The cycle may be so old and in such bad shape that the few lenders who provide this sort of financing won't touch it but, it may be worth exploring.

[HHM]

I think reaffirmation in this situation is dead in the water.

No attorney in their right mind would sign off and affirm that a motorcycle loan that is way upside down and with a 27% interest rate is not an undue hardship (also, rarely are motorcycles considered "primary" modes of transport, so hard to get a reaffirmation approved on a non-necessity). Likewise, if you go the reaffirmation route without the attorney and are required to go before the judge, unlikely any judge would sign off.

As Keepmine points out, redemption is the only other option, but if the vehicle is that upside down, that means it is probably older and few lenders will touch it.

Redemption is where you buy the vehicle for its current market value. So, if you owe $8,000 but the bike's current "replacement" value is $4,000, if you can come up with $4,000, you can buy the bike out of the BK and out from underneath the current loan for that $4,000 (which is a nice tool of BK). It doesn't really matter where the $4,000 comes from (so long as it is not from assets of the BK estate), you just need to pay it. Many people use "redemption loans" to do this sort of thing, but you will face certain requirements and restrictions, so that is why Keepmine and myself are a bit skeptical as to whether you could actually qualify for a redemption loan. But if a friend or relative wants to give you $4K, or you want to pull it from a retirement account, that works. The process can get a bit involved, so you do want the aid of an attorney.

[andy158]

I was devastated when I had to surrender my motorcycle when we filed bk13 three years ago. I had paid on it for a little over 2 years and still owed a boat load of money on it (Thanks to HSBC financing through the dealer. Big mistake!). Even after the two years of payments I was way upside down on it and couldn't even sell it for close to what I owed on it. They depreciate that fast. Bad thing to finance any kind of "luxury" vehicle. You loose your a**.

You can find a ton of motorcycles out there for a song now. I have been looking at several models comparable to the one I had and am finding them at less than 1/2 of what I paid for mine with super low miles. Imagine that.

Best advice is to let it go. Take the payments you would have been making on it and save for a new to you "used" one and pay cash. I am doing this now while still in this bk13.

[Tater]

I have to agree with the others here and say let it go. We have an older car that we thought about redeeming at fair market value. We owe a lot of money on it and our attorney suggested this. Since then, it's started having transmission problems so we have decided to let it go. Bankruptcy is about a fresh start and this will not give you the fresh start needed. Our old car would not do that for us as it was pointed out on the forum. Bankruptcy has taught us what our priorities are and we can get by with one vehicle. I believe your husband should decide what his priorities are and let the bike go. Like others have suggested, he can buy one down the road for cash. We plan to do that when we need another vehicle.

[ValleYum]

Playing the Devil's Advocate here: We don't know if the motorcycle is the sole form of transportation for the OP's hubby... he may need it to get to his job.

[layton87]

Thank you for your responses everyone. I read them to my husband today and he decided to ask his attorney what's best and accept that he'll probably give it up. We looked at comparable bikes and discussed buying a new one in cash with our next tax refund and money we've saved by not making payments any more. It's been such a struggle, we'll be so glad when this process is over!

[df04527]

I was devastated when I had to surrender my motorcycle when we filed bk13 three years ago. I had paid on it for a little over 2 years and still owed a boat load of money on it (Thanks to HSBC financing through the dealer. Big mistake!). Even after the two years of payments I was way upside down on it and couldn't even sell it for close to what I owed on it. They depreciate that fast. Bad thing to finance any kind of "luxury" vehicle. You loose your a**.

You can find a ton of motorcycles out there for a song now. I have been looking at several models comparable to the one I had and am finding them at less than 1/2 of what I paid for mine with super low miles. Imagine that.

Best advice is to let it go. Take the payments you would have been making on it and save for a new to you "used" one and pay cash. I am doing this now while still in this bk13.

^^ Agree. There are a ton of good bargains out there now.

[LadyInTheRed]

While I wouldn't advocate buying another motorcycle on credit unless it is absolutely necessary, your husband can probably finance another motorcycle in excellent condition soon after discharge and get an interest rate of 27.99% and maybe even better.

There is no way he should reaffirm that loan!

[AngelinaCatHub]

Thank you for your responses everyone. I read them to my husband today and he decided to ask his attorney what's best and accept that he'll probably give it up. We looked at comparable bikes and discussed buying a new one in cash with our next tax refund and money we've saved by not making payments any more. It's been such a struggle, we'll be so glad when this process is over!

Well, I half agree. I agree with listening to your lawyer. I disagree with using your tax refund as that could be estate monies. Be careful there. Saving I agree, but why a NEW unit? Hey guys, grow up. You lose 30% driving it off the show room floor. Don't you know that there is an epidemic in this Country? We are next to a depression whether you believe it or not. Buy some other poor sap's toy for a song in cash.

People are selling second cars and boats and toys because they think they can make their house payment right before they get foreclosed on. Look around you and this time observe your ride on two wheels at the amount of empty houses and for sale signs. Only my opinion. 'Hub

EDIT: Note my red marks. A VERY poor way to start a "new start" in life. You will be back here in a couple years with this kind of thinking.

[layton87]

AngelinaCatHub, I'm with you on that. He purchased his current bike before we met. And when I say "new one in cash" I mean new-to-you, a used model. I understand that it's not a wise financial decision in many ways, but he uses it to go to work and it definitely saves money on gas since our primary vehicle is a truck.

Can a tax refund next year be considered estate money, even though his bankruptcy should be discharged within a few months if everything goes well?

[AngelinaCatHub]

AngelinaCatHub, I'm with you on that. He purchased his current bike before we met. And when I say "new one in cash" I mean new-to-you, a used model. I understand that it's not a wise financial decision in many ways, but he uses it to go to work and it definitely saves money on gas since our primary vehicle is a truck.

Can a tax refund next year be considered estate money, even though his bankruptcy should be discharged within a few months if everything goes well?

The usage of now a good used bike changes my thoughts on it's viability. You are safe using next years refund. Once discharged, except in rare occasions (as fraud) you are free for your new start. I hope he does not ride it on ice. I don't know your weather in NV. Best of fortune on your BK. 'Hub