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Guru_Guy
Guru_Guy, Attorney
Category: Bankruptcy Law
Satisfied Customers: 2418
Experience:  Years of experience providing advice on bankruptcy and other alternatives to debt problems.
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I am in an open bankruptcy.......chapter 7. I am keeping ...

Customer Question

I am in an open bankruptcy.......chapter 7. I am keeping my house and was going to reaffirm my car loan. However, I have been told that a reaffirmed car loan does nothing for my "starting over" credit. ( My car is a 2001, valued at 4500. My pay off is 5500. I have aprox. 2yrs left on loan to pay it off. it has 70,000 mi. on it. I am looking at a new car (2007) that I can buy on a "bankruptcy type finance program" for $35.00 more per month than the $285. payment that Im making on my 2001 car. The first payment would be due in 45 days. The new car is more fuel efficient than my current one, has new tires, very safe.....with all around airbags....my present car needs new front breaks immediately, the tires are worn, and the payment is due immediately......so I have to come up with money immediately. I have a good job but work straight commission and my commissions are down right now, but will get better in a couple of months. What do you suggest would be best for me?
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  Guru_Guy replied 8 years ago.
Hello,

If you have already confirmed as being qualified for Chapter 7, and have found a creditor willing to finance your new car purchase, despite your bankruptcy proceedings, and are sure you can afford the payments, it might make more sense in this case to go with the new car.

Your old car is what is known as "underwater" since you owe more on it that it is worth. Thus, you are basically losing $1000 by reaffirming the debt. It is also in need of repair and more expensive to drive. These costs would probably more that offset the increased monthly costs you will have with the new car.

What you were told is correct. You gain nothing on your credit rating by reaffirming the car loan. A bankruptcy is a bankruptcy. Reaffirming some loans will not help on what this bankruptcy will do to your credit rating.

Just be certain the new car is in good shape and that you can make the payments. You will not be able to seek bankruptcy protection for several years if you get stuck in a bad deal.

I hope this helps!

__________________

Please keep in mind that information in this forum is for informational purposes only. It is not legal advice and does not constitute creation of an attorney client relationship. Before acting on any such information, you are always advised to consult with an attorney licensed to practice in your jurisdiction who can take the time to review all the facts and laws relevant to your situation.
Customer: replied 8 years ago.
If I wait until the bk is discharged....and let my current car go back to bank, does it show up on my credit as a repo? or do I need to make the decision of what to do right now, while bk is still open...? and how long do I have after payment is due, before they can actually take the car? I really appreciate what you have answered so far, but I am still a little unsure and confused about what to do.
Thanks,
Deb
Expert:  Guru_Guy replied 8 years ago.
If you are going to return the car, it should be done as part of the bankruptcy. Otherwise it will show up as a separate negative action on your credit. Also, if the repo is not part of the bankruptcy, the creditor could come after you for the remaining amount due. Even if the debt is forgiven, that forgiveness would be taxable as income if done outside the bankruptcy. Therefore, if you are going to give up the car, it should be done as part of the bankruptcy. It should be turned over voluntarily.

I hope this helps!


___________________

Please keep in mind that information in this forum is for informational purposes only. It is not legal advice and does not constitute creation of an attorney client relationship. Before acting on any such information, you are always advised to consult with an attorney licensed to practice in your jurisdiction who can take the time to review all the facts and laws relevant to your situation.

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