Expert: Mark J. Markus- California Bankruptcy Attorney - 1/10/2010

Question
Hi, I filed chapter 7 in DEC. 2009.  I did the paperwork myself out of necessity believe me.  I need to reaffirm my vehicle and just received the paperwork from the bank.  I had talked to a attorney months ago who told me after 2 1/2 years the bank has to drop loan to blue book value, the bank did not forgive a cent.  what is the rule here.  I cannot afford present payment amount and wanted to refinance.  After 2 1/2 years my vehicle is worth 10,000. less than I owe on it.   thanks

Answer
The bank doesn't have to reaffirm a debt for any specific amount.  This is a very complicated area of law right now.   If you enter into a reaffirmation agreement, you must go in front of the judge who must approve or deny the agreement based on his assessment of your ability to make the payments under the agreement.  If the judge approves it, then the agreement is binding and you will owe the amount of the agreement, even if the vehicle is later repossessed (because you fail to make the payments or honor other conditions of the agreement).  However, if the judge denies it, and you stay current with the vehicle payments, you SHOULD be able to keep the vehicle under your State's laws (but it really depends on the laws of your State) and if you default on the payments, they can repossess, but you will not owe any further money to the vehicle creditor.

Another option you have is a "redemption" which allows you to pay the current fair market value, in one lump sum payment, to purchase the car for that amount.  This is usually approximately the Kelley Blue Book private party value, but every judge has a different opinion on this.

You really need to consult with a bankruptcy attorney in your jurisdiction for proper advice on how to proceed with this.

http://www.bklaw.com/