I am about 12,000 upside down on my car. Is it possible to have reaffirm the real value of the auto when filing bankruptcy, or is it better to give the auto back?
3 Answers from Attorneys
You need to negotiate with the lender and try to get them to agree that it's in their best interests to reaffirm on the conditions you prefer.
It's possible you could negotiate that Reaffirmation amount with them but of course you can't count on it.
In addition to the possibility of reaffirming, you have the right to Redeem by paying them the actual value. They can't say no to that but you'll need to find the money first before you can just write them a check and have your Redemption go through.
Your best move financially is probably just give it back and go get something else. You'll be better off later.
Thanks for your question. The technically correct answer is that the bankruptcy code does not have a provision in it that allows you to reaffirm the debt at a lower value. But, as others have pointed out, that does not mean that the lender will not agree to accept a lower value. I have had almost no success getting that done with any of the major lenders, though. I think they do not want to set a precedent of allowing it, so instead they just prefer to repossess the vehicle and take the loss. That said, you have the right to redeem at the current fair market value, which means paying that amount in a lump sum. If you can obtain financing or have the money, that can be a good option. You would then just ask yourself whether you are willing to buy this car today for the current value. If you are, redemption is an option. If not, then let it go.
Finally, Chapter 13 offers a way on some vehicles, if you have owned it long enough, to pay the current fair market value with a low interest rate through the Chapter 13 plan. But, Chapter 13 does not always make sense. As Mr. Polk said, sometimes its better to just discharge the debt, give up the car, and start fresh.
You should consult with your bankruptcy attorney for more detailed information and for advice particular to your personal situation.
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