16 Aug Why Reaffirm When You Can Usually Get A Better Deal After Discharge?
Clients always are asking bankruptcy attorneys to sign off on their reaffirmation agreements so they can keep their car. Most Attorneys do not do this and prefer to make the Debtor go before the Bankruptcy Court for approval since reaffirmation agreements are worse off for the client and usually defeat the entire purpose of Bankruptcy by making the debt non-dischargeable.
Of greater importance, is that fact that there are usually better deals after discharge than what the current reaffirmation agreement has to offer.
Our office generally will not sign off on more than a few reaffirmation agreements in an entire year, despite thousands of requests. For those clients that insist, they must attend a hearing before the Bankruptcy Judge who will then parentally ascertain whether such an agreement is in the best interest of the debtor prior to allowing entry of the agreement. Our Bankruptcy Court disapproves over 1/2 of our clients’ requests.
The better option, at least in Southern California, is to purchase a vehicle after discharge, once all the debt is eliminated(1/3 the credit score is based upon the debt to credit ratio that improves tremendously after discharge). But Caveat Emptor….Buyer Beware! Watch out for dealerships. If you have the cash, its usually best just to purchase a temporary vehicle for a few thousand dollars and finance later once your credit gets back to perfect.
This is because the old school way of buying a car from a dealership after a recent bankruptcy is starting to disappoint alot of consumers. Dealers are used to putting people in vehicles and looking for financing afterwards. However, the Credit markets are so tight now that many of these people end up having to bring the vehicle back.
A better option, as referenced in my previous article, might be to go through an outfit that specializes in such transactions. Such companies typically create much better deals than reaffirmation agreements in at least 4 ways:
- Newer Vehicle
- Better Interest Rate
- Lower Monthly Payment
- Lower Principal Balance
For example, our firm referred several clients over the past month to acompanywho delivered excellent results as follows:
Example #1: With less than 2000 dollar per month in income, coming straight out of bankruptcy, our clients got 13.99% financing on 2007 Ford with $900 down payment.
Example #2: Couple was without vehicles for the past 6 months after bankruptcy discharge. They got up at 5:00 am to ride the bus and train to get to work daily. They received 2 new car loans this past saturday at great rates after being told by dealerships that they would never get another loan again.
Example #3: Divorced mom with 3 small children recently received discharge and immediately financed 2008 Nissan Pathfinder at a payment less then they what previously paying before.
Example #4: Recently discharged couple surrendered both cars in bankruptcy they were upside down, and financed two new vehicles at 11.95% and 12.99%.
So watch out for reaffirmation agreements! There are usually better deals out therewhich will save you thousands of dollars and replace your older vehicle with a newer one!
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