Please explain ride through vs. reaffirming

[bkrelief22]

As usual I've read alot of threads and get more confused. We are filing CH 7 are current on car payments and planned to keep the car. We owe more than it's worth...I know what you're thinking...get rid of it...however DH wants to keep it and the payments can be handled... We donot have the $ for any downpayment, etc., or to buy it out.

My question is , is it better to do a ride through, or reaffirm?? And What is the difference. Which is better and why?

Our attorney said."Do you want to keep the car?" and I said Yes...it's the only one we have.

Thanks in advance for giving me clarity!

bk22

[b_girl]

A ride through is where you keep the collateral, do not re-affirm, but continue to make payments. Not all lenders will work with you on a ride through, so you are taking a risk. That's because when they changed the BK law (in 2005 I believe) they actually removed this option from the law, but because old habits die hard, it still gets used as an option. It will usually work on a vehicle, but not always...Cali has posted in the past about a person who lost their vehicle anyway on a ride through. So if you choose this route, you face a risk of losing your vehicle anyway should the lender see fit to take it from you for any reason.

A re-aff is where you agree to take back the loan after BK--in other words, you are back on the hook for the entire amount. That means that should you default on the loan in the future due to unforeseen circumstances (the kind that drive people into BK in the first place) you will be liable for the deficiency amount, if any, after they repo it and sell it at auction. Unless 8 years has gone by, you can't declare BK again, so you will most likely be sued, depending on the amount due.

So in one sense the safest course is the re-aff--they can't take it away if you continue to make the payments through out the life of the loan..but what if you can't? That's the rub. It's a hard decision and one we wrestled with for several months until we finally decided to chuck both and get a new one which had a lower payment and loan amount than the one we almost re-affirmed. Good luck in your decision.

[liz417]

I agree with b_girl, but I must add...a lot of people (posters) have done "ride throughs" and have had no problems. Some filers run into problems with the credit unions, they won't let you reaffirm the car(s) without reaffirming the loans too.

Good Luck!

P.S. We intend to "ride through" and continue to make timely payments when we file ch 13 later this year.

[bkrelief22]

Thanks bgirl and liz!! Now I finally understand it. Thanks so much for the clarification. We'll defiinitely have to think this one through!

bk22

[keepmine]

There is caselaw that states a debtor has met their obligation under the code by offering to reaffirm. If it's rejected by the court, the creditor can't repo.

http://www.georgiabankruptcyblog.com/archives/miscellaneous-cases-arizona-bankruptcy-court-ride-through-still-available-for-secured-debts-after-failure-of-timely-filed-reaffirmation-agreement.html

[b_girl]

Interesting article, keep. To clarify this a little more...if you agree to re-affirm a loan, it has to be approved first by your lawyer and then by your judge. If either sees that re-affirmation is not in your best interest, you will not be allowed to re-aff that loan.

[momof5]

Another thing about reaffirmations that I was not aware of as you dont read about it much here and of course our attorney never said a word.
If you owe more than its worth and are in the negative on your schedules then your attorney may not sign off on a reaffirmation.
What this means is that you will have to have it approved by the a BK judge. That will involve you going for a hearing and explaining why it is in your best interest or how you will be able to pay the monthly bill. The judge is looking out for you believe it or not.

At this point if the judge does not agree a reaffirmation is in your best interest he will deny it. That doesnt mean you wont be able to keep the car it just means that you will not be held legally responsible for it it.
You must continue to pay if you want to keep it. Thats of course if the lien holder lets you.

We changed our mind before the hearing and decided to just let it go. Good thing too because I know a reaffirmation was NOT in our best interest and probably wouldnt have be approved. Reaffirmations only benefit the creditor. Ours was a Credit Union and they would have wanted the car back anyways. No reaffirmation, No car. On their reaffirmation they added in additional fees and payments. Made me sick to think thats how they were going to treat us while we did THEM a favor by continuing to pay for the vehicle.

They just sold it for about $2500! We still owed nearly $9000. Their loss!

Please dont allow yourself to be ripped off on a vehicle. While I know its your only form of transportation right now please also consider other options.

Like I said at first we never even entertained the idea of given our car back. We had already paid for 2.5 years... wouldnt that be money flushed? When in actuality if I continued to pay for it for the next 2.5 or so that would have been money flushed. Just weigh your options.

I have been without a car (2 car family) for a couple of months. Hubby just found me a wonderful chevy cavalier. 2002- 53000 miles for less $2000. It needs brakes and new tires is all. He does all our car work so for about $500 more I will be driving a little zippy car that is good on gas and NO CAR PAYMENT!

[laurannm]

One other thing to also keep in mind regarding ride-throughs, particularly when it comes to a car, is your state laws. Your state laws still apply after your BK is discharged and closed, and some states do not allow repo as long as you are current, regardless if you sign a reaffirm or not (our state, Massachusetts, is one of them).

[b_girl]

I found this excellent article while doing some internet searching today...

http://www.doanlaw.com/blog/?p=11

[bkrelief22]

Thanks keepmine, bgirl, momof5 and laura...I so appreciate all the information and articles. It really gave me a much better understanding of it all! Just like going to school without having to sit in class, other than on my computer...much more fun!

Thanks to all of you who keep educating us!!

bk22

[b_girl]

Thanks keepmine, bgirl, momof5 and laura...I so appreciate all the information and articles. It really gave me a much better understanding of it all! Just like going to school without having to sit in class, other than on my computer...much more fun!


bk22

Ain't that the truth! It's like we're mini BK experts...we've probably picked up more info than quite a few of the paralegals out there.

And you're quite welcome.

[Stilltheone]

I just wanted to add that we signed a reaffirmation agreement on our Escalade and now wish we hadn't.

At the time we filed, we actually had equity that we had to exempt. Now, we owe $19K and it's worth half of that. We try to trade it in and can't roll in that kind of equity.

If I could go back and do it all over again, I would've never signed it. I would've let it go and started over.

Good luck to you!

[keepmine]

I found this excellent article while doing some internet searching today...

http://www.doanlaw.com/blog/?p=11

Eating some steel-I like that!