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"Reaffirm the debt" regarding an Auto Loan

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  • "Reaffirm the debt" regarding an Auto Loan

    What exactly does it mean to "reaffirm" an auto loan? I tried searching for answers, but couldn't find out exactly what that means.

    My petition indicates that I intend to "Reaffirm the debt" regarding my car (keeping) which is worth more than I owe on it. But, I don't fully understand what that means. Will there be new terms? Will my payment change? Thanks.
    Filed Ch7 11/2011, 341 - 12/5/11, 12/6/11 - Trustee's Report of No Distribution - No Funds
    Deadline to file Objections: 2/3/12, DISCHARGED & CLOSED 2/10/12!!!

  • #2
    It means if you later defaul on this loan they can come after you for money. If you don't reaffirm, they can take the car but can't sue you for any money they say you owe them.

    We did not reaffirm our cars. We continue to pay them but can walk away any time.
    Attorney Retained/Paid: 1-4-10
    Online CCC-Completed & Cert Received: 1-8-10
    Filed Chapter 7 1-18-10.
    341 3-10-10 ~~~ Last Day to Object: 5-10-10


    • #3
      Reaffirming is like a "new loan" in BK. You are not off the hook if things get really bad. (of course, with our government now, all things will get "ducky").

      Riding through means to keep paying the note. As long as you are up to date, don't miss a payment you are abiding by your note (read the fine print) as they don't want another used car, but your money. DO NOT reaffirm. (my opinion.).

      If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.


      • #4
        Your petition saying that you intend to reaffirm does not obligate you to reaffirm. A reaffirmation agreement has to be filed with the court and either approved by your attorney or the court. My opinion is the same as 'Hub's: Don't reaffirm. Your attorney's opinion may very well be the same.
        LadyInTheRed is in the black!
        Filed Chap 13 April 2010. Discharged May 2015.
        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!


        • #5
          This is one you need to carefully review with your attorney.

          Some lenders (Ford Credit, Toyota Credit for example) say in their contract that filing bankruptcy is an "event of default" and will try to repossess if you don't reaffirm. Some BK courts and states allow this, in others it isn't allowed. So don't just assume you can do a "drive through" and keep paying without reaffirming.

          There are two reasons not to reaffirm. The first is that you are now back "on the hook" for the loan and cannot file BK again if you get into trouble. The second is that when you reaffirm you give up your BK discharge and get nothing in return (like a reduced interest rate for example).
          Chapter 7 Filed 8/11/2009, Discharged 11/23/2009


          • #6
            Ok, maybe I should have included more information. I am current on the loan and intend to continue paying it. It's with a credit union where I also have my main checking/savings (they withdraw payments automatically). I guess my best bet will be that they will just let me continue paying it, without a reaffirmation agreement. But if they require the reaffirmation agreement because of the BK, why is that different than if I just continue the loan as is? My understanding is that with the reaffirmation agreement rather than using the car as collateral in case of default, they'll sue me for cash? Is that right or is there more to it?
            Filed Ch7 11/2011, 341 - 12/5/11, 12/6/11 - Trustee's Report of No Distribution - No Funds
            Deadline to file Objections: 2/3/12, DISCHARGED & CLOSED 2/10/12!!!


            • #7
              On a (secured) car loan, your obligation to pay is discharged, you don't owe any money any more. But the lender retains a security interest in the collateral (the car) and if you default they can repossess it. You would think that if you just make the payments, the loan stays current and they cannot repossess, but that's going to depend on 1) your loan agreement and 2) what the rulings in your jurisdiction are. If the Credit Union says in the agreement you signed that filing BK is a default by itself, they "might" be able to repossess even when payments are current.

              Credit Unions also generally "cross collateralize" all debt and deposits, so they might claim a right to whatever funds you have on deposit. Where this can get sticky is where someone owes a CU for a car loan and a credit card. They make the car loan payments but discharge the credit card. Now the CU says it won't give the title to the car becuase the cross-collateralized credit card is still owed.

              Finally, the CU might freeze your deposit (checking / savings) accounts.

              I thin the best source of information for you is your lawyer. He or she should know the details for your jurisdiction and may have dealt with that specific CU before.
              Chapter 7 Filed 8/11/2009, Discharged 11/23/2009


              • #8
                Thank you Charlie777. I don't have any credit cards with the credit union. Only Checking, Savings & Car Loan. I don't keep any extra money in there, but my paycheck gets direct deposited & I pay all my bills from their online billpay system. I'm hoping that because I intend to stay current on the loan (and reaffirm), they won't freeze my account... It would be counterproductive for them to do that, but I guess we'll see how it plays out. I did speak to my lawyer, and basically the only difference for ME (as long as I stay current) between just paying the loan and reaffirming it is that a reaffirmation agreement is reported to the credit bureaus. So as long as I continue making my payments as intended, I can rebuild some of my credit by reaffirming the loan.

                He did say that in very very rare cases, they will reposses the car instead of agreeing to reaffirm, but he reassured me that the chances of that are very slim.

                This is so nerve-wracking. On top of this, my soon-to-be ex is scheduled to be released from prison today & I'm a nervous wreck! I'm sure everything will be fine, I'm an eternal optimist, but it still makes me nervous... Anyway, thank you!!
                Filed Ch7 11/2011, 341 - 12/5/11, 12/6/11 - Trustee's Report of No Distribution - No Funds
                Deadline to file Objections: 2/3/12, DISCHARGED & CLOSED 2/10/12!!!


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