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25

Jun 2020

After bankruptcy….the car still has to pay!

Posted by / in After Bankruptcy, Blog, Chapter 7 Bankruptcy, Weekly Posts / No comments yet

…But the Car Still Has to Pay.

When you file Chapter 7 bankruptcy, that means you don’t have to make the car payments.

But that does not mean you get a free car. You don’t have to make the car payments, but the car still has to pay.

That’s because the car finance company is attached to the car title. Lawyers call that a lien.  If the debt that’s attached to the car isn’t paid, the lien holder will repossess the car.

Don’t Forget to Make the Car Payment

It’s easy after bankruptcy to forget to make the car payment.  If it slips your mind, the car finance company won’t send you a reminder. Why? Because you don’t have to pay. They also won’t send the car a reminder letter. They know the car doesn’t open its mail.

And if you get a week behind, they won’t call and demand payment. Because you don’t have to pay. And they won’t call the car, because the car doesn’t have a phone. Only one thing happens if you forget to pay. You wake up in the morning and the car is gone.

Don't forget to make the car payment. The car still has to pay.

If you forget to make your after bankruptcy car payment, you won’t see the car. the car still has to pay.

Does Paying the Car Help Your Credit Score?

Suppose you forget to pay and the car gets repossessed. The repossession won’t show up on your credit report.  That’s because the bankruptcy discharges the debt from you. But that also means your car payments won’t show up on your credit report if you do pay. You don’t have to pay.

Only one thing happens if you pay. You keep the car.

Only one things happens if you don’t pay. When you wake up in the morning, the car is gone.

You need to make the car payments if you want to keep the car. 

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12

Mar 2020

After Bankruptcy, OneMain Offers Car Reaffirmation Negotiation

Posted by / in After Bankruptcy, Blog /

In the last few months, OneMain has been contacting me about reaffirmation negotiation on car loans.

That took me by surprise.

With the exception of Ford Credit, I’ve been strongly opposed to reaffirming cars.  Usually you can keep the car without reaffirming. and then give it back when your credit improves. I explain more about that, here. 

Car reaffirmation take it or leave it

Most car reaffirmations come to me on original terms, full balance, take it or leave it. OneMain is NOT doing that.

OneMain figured out that they don’t want you to give them the car back when your credit improves, so they are offering you a better deal now. Up ’til now, I had never seen a car finance company really offer car reaffirmation negotiation. They wanted people to reaffirm the entire balance at the current interest rate on a take it or leave it basis. 

But OneMain has come through with real balance and interest reductions. Taking a terrible loan and making it pretty good. If that’s on a car that you have been taking good care of–and been lucky to avoid problems with–then that makes sense.

Basically, here’s how this works. Get an accurate value on your car. Kelly Blue Book is one place. (Carmax offers on line, here.) We need to email OneMain, at this email cbp@omf.com, with the Blue Book value and say we’re willing to reaffirm based on that value at 6.0%.  

OneMain then will send back a reaffirmation on that basis. At least a lot of the time. (Sometimes I’ve seen them add a little.)

PS  I need to apologize to one of my clients last year, Kandy. Kandy believed OneMain’s offer when I thought it was just more smoke and mirrors. She was right and I was wrong. OneMain does seem to genuinely be willing to work out a new deal for you to keep the car.  This is my apology, Kandy.

 

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30

Jan 2020

Right After Bankruptcy, Carla Signed on a Car Loan

Posted by / in After Bankruptcy, Weekly Posts /

Right After Bankruptcy, Carla Signed on a Car Loan and She’s Probably Gonna Lose Her House

I tell people please please please, do not get a car loan until at least two years after your Chapter 7 bankruptcy.

 

Two years after bankruptcy, I’m seeing people get car loans in the 6%-8% range. Three years in the 2%-4% range.

 

So please please please do NOT tie yourself to a 24% car loan right after filing bankruptcy. Here’s a true story that tell you why not.

 

after bankruptcy car loan

Please please please do not tie yourself to a 24% car loan right after bankruptcy.

Carla filed bankruptcy with me in 2014. Six months later, she co-signed on a car loan for her sister. The loan was financed by Credit Acceptance, at 24% interest. 

 

After a year, the sister stopped paying. Carla paid for a while, but when she stopped, or course that car got repossessed January 2017.

 

Fast forward to 2019. Credit Acceptance gets a judgment for $8600, attaches that Judgment to Carla’s house, and puts a garnishment on her pay check.

 

Carla is stuck. She can’t afford the house payment while being garnished. It’s too soon to file Chapter 7 bankruptcy, again. And if she could, the equity she’s built up since 2014 means the bankruptcy court would take and sell her house. And while she’s eligible for a Chapter 13 bankruptcy payment plan, she can’t afford that payment, either. (Under Virginia law, with terrible equity protection for single people, her Chapter 13 would have to pay all her debts in full.)

 

Two mistakes. First co-signing for someone whose credit was worse that hers!! Second, letting the dealer arrange financing at a terrible rate.

 

If you have to finance a car shortly after bankruptcy, shop for the car loan, before you shop for the car.

While it’s especially important right after bankruptcy, that’s always good advice. Shop for the car loan, before you shop for the car. (Unless the factory is having trouble selling their cars, dealer financing will always be more expensive than the best loan you can get for yourself.)

 

Sometimes, some people have no choice. They have to finance a car just a few months after bankruptcy. If you really have to, here are some of the places you can look.

 

722 Redemption Funding. These people are in the business of car loans immediately after bankruptcy is filed. they will put you in a bad loan; but probably a much better loan than the horrible loan a car dealer would recommend.

Bankruptcydrive.com is a new company that contacted me recently. I don’t know much about them.

Tower Federal Credit Union. Tower is the largest credit union in Maryland, and they make car loans to people in Virginia. I’ve seen them make loans to people right after bankruptcy that were better than I expected.

 

I’m not recommending any of these three. What I recommend is getting at least two years after your bankruptcy discharge before you finance a car. But if for some reason you can’t wait, shop for the loan before you shop for the car. And shop at least three places: try to get the best bad deal you can get.  

 

 

 

 

 

 

 

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES