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Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1975
Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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Im helping my mother in law out with her finanances as she

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Im helping my mother in law out with her finanances as she is in heavy debt and cant pay her bills. our first task is she has 2 credit card bills totalling $15,000. She hasnt paid on them in 3 months as she doesnt have the money to do it. What would the process be for calling the credit card company and seeing if they will negotiate a settlement payoff amount which is much lower than the amount owed. Or if they would settle on a payment plan. Please let me know what the proper steps would be to maximize her chances of getting a reduced payoff. Also, would you suggest using a debt counseling service. She looked into chapter 7 BK but her income is too high.
Thank you for your question.

Since you say that income is "too high", is there a reason why getting some breathing room in a Chapter 13 is unacceptable? Please know that if all creditors are not paid in full over a five-year plan, most remaining unpaid debts get discharged.

A Chapter 13 costs more to file than a 7, but if the monthly payments are beyond the monthly income, then it makes sense to skip a few of those payments, get the "down payment" to get a 13 filed, and then pay the rest of the attorney's fees in the Chapter 13 Plan (a sort of forced budget).

Thank you.

Brent Blanchard and other Bankruptcy Law Specialists are ready to help you
Customer: replied 4 years ago.

She looked into chap 13 but I dont think she needs to go that route. She had a huge boat payment which we were able to sell the boat this week and it paid that off. Now she has 2 huge car payments totalling $1500 month. loan amount is 80k for the 2 cars. Value is about 50k. She also has the credit card debt totalling about 15k.


If she were to just turn in her cars to the lender, do they come after her for the difference in the form of a judgement? Her credit is already destroyed so preserving her credit is not important.

Thank you for the additional information.

I'm not sure that I have EVER seen a car financing contract that did not include the right of the lender to sue the borrower for a post-repossession or post-surrender deficiency. The Uniform Commercial Code requires that sales of collateral be done in a "commercially reasonable manner", but the auto auctions they use are NOT the place to get the highest and best price.

The longer the financing term, the more likely it is for a finance vehicle to be worth less than the purchase loan. Same for the interest rate, the higher the rate, the more likely the loan today is worth more than the collateral. Depreciating assets like cars should be bought on 3- or 4-year loans, as a matter of financial self-protection in the event that a lender needs to enforce legal rights later.

I'm glad that you realize that if someone is not going to borrow money in the next five years, credit ratings are of little consequence. I've had clients who almost worshiped their credit scores.

There is always the chance of negotiating a surrender of collateral which includes the lender's written waiver of any right to go after the deficiency. That depends on what kind of mood the lender is in. The dollars they could get for the car and the costs of auction also play into their decision (non-legal matters for them, which influence their legal decisions).

The WORST thing someone could do in negotiating turnover, or negotiating a payment plan or reduced interest rate or other modification (which no lender has ANY duty to do at all), is to sign a document called a "confession of judgment". This is often offered to people as "security" for the future payments, usually when that person has no attorney helping them. A confession of judgment is a written grant of permission for the lender to take a judgment against the borrower, with nothing more needed than just filing the breach of contract complain, then skipping EVERYTHING and filing the judgment document. No trial, do not pass "GO", do not collect $200 like in the Monopoly game.

Thank you.

Brent Blanchard and other Bankruptcy Law Specialists are ready to help you
Customer: replied 4 years ago.

We have decided that my mother in law cant keep up with her car payment and needs to get rid of the car, she is already 2 months behind on her car payments and will be 3 months soon. Should she first contact her lender who is Ford credit and tell them she cant make the payments any longer and to see if they will take the car in exchange for a waiver of the deficiency? Anything specific she should ask them? If they say that they will not do that, what would be her next step?

It is hard to predict what a lender will do on a car repossession, other than sell it for cheap at auction.

Since the depreciation hits hard the first six months of a car no longer being new, AND the mathematical realities of paying interest on borrowed money means more of the payment goes to interest in the first years than goes to reduce the loan amount, serious "upside-down" situations are more likely in those first three years of a car loan. So, there is generally a larger financial "hit" to the lender in an early repossession. Loan balance vs. amount sold at auction can get quite ugly, leaving a lender less likely to waive any deficiency.

Then, when the loan balance is low and the depreciated vehicle is still worth more or even a lot more than the loan value, a *longer-term loan*, like those 7-year ones which were unheard of when I was a kid, put the car so old that it is harder to sell at auction.

So, when trying to negotiate for a lender to waive any deficiency:
1. First, know all the facts. Loan balance, value of vehicle, try to find out whether the local market is soft for that one or if it's in large demand.
2. Second, mention limited/fixed income and the prospect of maybe filing bankruptcy if all those financial pressures pile up too steep.
3. While doing all this, avoid mentioning assets that can be attached or levied on by a creditor. Mention anything that is exempt from execution.
4. Be very, very careful about agreeing to anything in the conversation. Clever people can trick a person into saying things that amount to "acknowledging" the validity and lack of defenses on a debt, or otherwise hurting their cases.

Thank you.

Brent Blanchard and other Bankruptcy Law Specialists are ready to help you