Help! I'm looking for Ladynred

[IBroke]

What is the name of your state (only U.S. law)?
Florida

Hi,

This is my first post and I've virtually searched the entire internet to find an answer to my question:

7 months ago, my mother and I got a joint car-loan at one of these "buy here, pay for an eternity" dealerships. I'm going to file for BK Chapter 7 and would like to redeem the car. The balance of the loan is $7,000 and the value of the 10-year old car is less than $1,500.

Is it true that my mother, the co-signer, will be off the hook if I redeem the car or will she still be liable for the money the creditor is short?

My mother is planning on filing a few months after me (also CH.7) so it would also be great to know if she would have to continue her payments until she files in order to avoid late payments on her credit report or if my automatic stay would protect her credit as well (I know, usually not - but maybe redemption is different in that regard than surrendering).

I'm asking Ladynred because I located an ancient post from 2004 where she told a different member that a co-signer would be off the hook if the car would be redeemed.

Of course, if anybody else knows the answer, I'd highly appreciate any comments!

Once again, Thanks in advance to anybody reading this!

[justalayman]

if you can find that thread again, you might paste and copy the url in this thread so others can view it.

I see no reason your mother would not be liable for any deficiency if you return the car. If she is also filing BK, making the payments, although legally liable until she goes through BK, does not make a lot of sense BUT the car creditor could file suit and that judgment could become a problem so the time frame is important.

If there is any doubt as to her filing BK, I would suggest she continue payments to forestall any legal action by the car lot.

btw: if you allow repossession, that terminates the contract and any payment agreement you have entered in to. Any deficiency and costs from the car and subsequent auction would be due on demand.

[IBroke]

Thanks for the quick response! I'll try to locate that post and copy it!

We are current on that loan and will stay current until she files. Her filing date will be PRIOR to my discharge. The next due date is 02/25 and we will pay that installment next week.

I'm going to file mid-March, so prior to the next payment due. That takes care of my credit-reporting AND makes a repo impossible - at least that's what I think (automatic stay)?!

If I understand correctly, all we need to do is to continue to make the regular installments until she files IF she does so prior to my discharge (which will be the case). They can't report her 30 days late until she actually is (and even then, only prior to her filing), I just don't know what they can do if she defaults on the loan. They might do other things we rather avoid so we'll continue to pay.

The reason why I want to continue her payments is to avoid the reporting of lates to our credit-reports. That might sound silly for a BK-account but a BK-account with lates does more damage than one without.

But you are saying that they can't demand a lump sum after I filed AND IF she makes the regular monthly payments on time until she files? That would be a relief! Who knows, I thought they might be able to cancel the entire contract due to my filing and demand the entire balance at once from her - although we are current..

[IBroke]

Ha, found it! Here's the link to the entire thread:

[url]http://forum.freeadvice.com/consumer-bankruptcy-2/house-paid-car-has-co-signer-183808.html[/url]

And here's the specific post by Ladynred:

"Car - your mother filed bankruptcy but you both signed a reaffirmation agreement ?? If you file for bankruptcy and you want to keep the car, you will have to reaffirm it or REDEEM it. Since you're that upside-down on it (owe more than its worth), your best bet is to redeem it. That means you pay the creditor current market value for it, NOT what you currently owe on it.

Obviously that means you have to come up with the cash. If you do not or cannot redeem it, if you want to keep it you will have to reaffirm. You cannot keep secured property in FL w/o a reaff or redemption. If you just let the car go, your mother WILL be held liable for the debt because she signed the reaff on it. Redeeming it would get her out from under it AND save you a lot of money in the end."

Also possible I got it wrong?!

[IBroke]

Originally Posted by justalayman

I see no reason your mother would not be liable for any deficiency if you return the car.

Oh, I just noticed that!

I want to redeem the car, not surrender/return it.

Maybe that's also what you meant but I wanted to make that sure to avoid misunderstandings.

[justalayman]

Dang, I really need to get some sleep.

I simply misread your post. I did not mean redeem and I do understand that is what you meant so forget about that post.

Sorry about that.



I'm not 100% sure of mom being released from any debt concerning the car if you redeem it and, of course, this takes the cooperation and approval of the creditor for this to happen or the courts order. Since there is a co-signer (mom), the car finance company may be hesitant to allow this to happen. If there were no co-signer, it is ssometimes wiser to accept a redemption agreement rather than simply repo the car and write off the loss because that is generally what will happen.

In this case, there is another creditor not in BK (yet) they can chase for the money.

If they do go for this, just make sure part of the deal is the current loan is discharged against you and voided concerning mom. I do not know if there is a sneaky back door where they could allow you to pay a redemption to remove the lien and still cause the original loan to be collectible from mom. Make sure any such door, if it is there, is closed.

heck with it;

hang on for ladynred to clear up my mess.

[IBroke]

Thanks for your response!

Now I need the APPROVAL of the lender to redeem? I was under the impression that the law gave ME 3 options (surrender, reaffirm or redeem), not the lender.

I thought the worst thing that could happen if I file and indicate "redemption" in my motion of intend (I guess that's what is called) would be that the responsibility would transfer to my mother and she would have to continue to make the monthly payments until she files.

Now that I would need the lender's approval to redeem the car would be news to me..

Let's see if Ladynred has a chance to bring some light on that issue...

[bigun]

LNR is appears to be spending more time at [url=http://www.creditinfocenter.com]Free Credit Reports Credit Repair Counseling Increase Your Credit Score Debt Consolidation[/url]
Try the bk forum there.

[IBroke]

Thanks for the advice! I posted a thread and sent a PM!

That was too funny - I was already a member of that board since 2005 - but totally forgot about that. I scratched my head when the system told me "this e-mail is already in use" when I wanted to register..

[IBroke]

Somebody on that other forum just said I would have to pay the FULL balance to redeem because there is a co-signer..

Guess that's news for you guys, too..

Now what if I would delay my filing and do it the same day she does? Could I then redeem at market-value since the co-signer would be protected, too?

[justalayman]

=IBroke;2176049]Somebody on that other forum just said I would have to pay the FULL balance to redeem because there is a co-signer..

The creditor can agree to anything they want. This is why I suggested they mat not agree to this because there is a co-signer outside of your BK protection and they would not have any reason to accept the redemption simply because they still had the co-signer on the hook for the total amount.

The only thing I was having trouble with is; if they do agree to redemption, how to make sure the co-signer is relieved of any further claims against them as well. I do not understand this situation well enough to direct you concerning this and thus my caution to be sure the redemption included all (you and co-signer) are fully released from any further claims.

Now what if I would delay my filing and do it the same day she does? Could I then redeem at market-value since the co-signer would be protected, too?

I would suspect it would be possible to do this.


One thing you need to realize is; in "buy here, pay here" lot's, the prices are often way over inflated. The creditor may simply repo the car and intend to resell it to some other desperate individual at an inflated price rather than sell it to you at market value. That would be more beneficial, financially, to the car dealer so they may not accept a redemption.

[IBroke]

Thanks!

Actually, it doesn't really matter if she would be released as well, she could keep up with the payments until she files.

I can already tell from various answers on various boards that I have to consult an attorney here. I'm getting a different result from every different post..

Somebody else even said it wouldn't work due to the 910-day rule although that only comes into play in Chapter 13..

One thing I know for sure though is that in general (on individual loans), a creditor can be FORCED into redemption. It's not him to decide. It's not up to them to "accept" redemptions. It's the law. What kind of dealership the lender is is not important either - at least not from a leagal POV. In that case, you could burn KBB and NADA and simply put up a price 3x that high and always argue "that's the value because there is certainly a moron out there who's going to pay that price."

What I don't understand is the difference from a legal standpoint:

What difference does it make between surrendering the car and the liability being transferred to my mother and redeeming it and the same thing happening to my mother in regards to the liability?

Assuming the co-signer stays liable:

If a car is surrendered, the lender gets the car and can sell it at its value, the remainder of the loan is released and the liability is with the co-signer. Now if I redeem the car, the lender get's the value of the car from me. Everything else is the same, right?

So what difference does the co-signer make? I don't understand..

A different way/option would be to get a discharge from the loan on my BK and have my mother continue making the timely payments and keep the insurance (incl. gap-insurance) up to date. Since there is no breach of contract, they can't repo.

When my mother files, she stops the payments and redeems the car.

[justalayman]

One thing I know for sure though is that in general (on individual loans), a creditor can be FORCED into redemption. It's not him to decide. It's not up to them to "accept" redemptions. It's the law

.You have a citation for that? If a creditor is willing to take a total loss, I can see no logic behind attempting to force him to take a redemption. In fact, I would see this as lack of due process for the creditor. While they can abolish the debt overall, I do not see how they can force them to take a greater loss than that.

What kind of dealership the lender is is not important either - at least not from a leagal POV.

I merely echoed your words since this type of dealer is known for pricing vehicles above true value due to the types of debtors they sell to. (not inferring anything bad other than credit problems for whatever reason)

In that case, you could burn KBB and NADA and simply put up a price 3x that high and always argue "that's the value because there is certainly a moron out there who's going to pay that price."

gee, sounds like exactly what they do. and it is. they sell for as much as they can get. and btw; the NADA and KBB values are determined by averages. they have nothing truly to do with what a person can sell a car for. It is merely a guide to settle disputes and as a basis for a lender to not loan more than they could recover should they have to repo.

What I don't understand is the difference from a legal standpoint:

What difference does it make between surrendering the car and the liability being transferred to my mother and redeeming it and the same thing happening to my mother in regards to the liability?

they make more money if you do not redeem the car until she files as well. Since she hasn't, they most likely proceed with the thought that she may not file. Many folks threaten to file BK all the time. Especially since the laws concerning BK have changed, there are more obstacles to actually being granted BK.

Assuming the co-signer stays liable:

If a car is surrendered, the lender gets the car and can sell it at its value, the remainder of the loan is released and the liability is with the co-signer. Now if I redeem the car, the lender get's the value of the car from me. Everything else is the same, right?

you seem to think they will only sell the car for what you believe the value to be. The fact you owe $7k on a car worth $1.5k on a loan that is only 7 months old is the best example I could ever use for my point. They will make more money by repo and resell than by redemption.

So what difference does the co-signer make? I don't understand..

because until she files BK, she is liable for the total loan, not the "value" based upon NADA or any other listing.

A different way/option would be to get a discharge from the loan on my BK and have my mother continue making the timely payments and keep the insurance (incl. gap-insurance) up to date. Since there is no breach of contract, they can't repo.

right, and the lender will get their $7k for a $1500 car. All will be happy apparently.

When my mother files, she stops the payments and redeems the car.

I await legal support that a redemption can be forced on a creditor.

[IBroke]

I have yet to read anywhere on the internet that you can only purchase/redeem your car if the lender agrees. Why should a lender all of a sudden accept a "total loss"? Certainly, there is no need for a redemption if I get the car for free, but I doubt that's going to happen and it's def. not what we were talking about. Fact is, I decide if I redeem or not. It's a right and not something I have to ask for by falling on my knees. So if you think there are lenders out there who would rather hand you over the car and NOT get the market-value for it, please show me where..

Forcing redemption means the lender CAN'T REFUSE to give you the car if you pay them the Market Value. Nothing more and nothing less. I don't care if they take the money or not.

There have already been a bunch of trials just to determine what the appropriate value would be a trustee should apply (Trade-in, Wholesale etc.).
Now why argue about that in court if the lender can simply say "No redemption, sorry!"? In that case, a redemption would only take place if a lender would be satisfied with the amount - no need for market-values.

I'll send you a PM (since I don't know if it would be OK to post them here) with a few links (incl. a statement of an attorney) that point out that a lender can be FORCED into redemption. NOT into a reaffirmation - but into redemption.

First of all, not every lender is a predatory one like mine is. If you surrender a car, a lender has certain expenses he wouldn't have if the car is redeemed (reconditioning etc.). These cars aren't transferred from your garage to the next showroom. Many of them are auctioned off. In addition to that, the revised BK-law from 2005 uses a new, slightly higher value for a redemption of a privately used vehicle under CH7. This amount is closer to the wholesale-price rather than trade-in value - just with a few deductions. It depends on the jurisdiction what value they actually use. I disagree that under normal circumstances, they would take a higher loss than under a surrendering. My case is an exemption, but since I already paid $3,000 for the car and being charged an APR of 23%, it's a risk the lender probably already expected. The law regarding redemption was created in regards to the huge companies like Ford, Chrysler, BMW etc. They don't sell cars for 3x the market value.

Not every law in this country was written in favor of the lender - 722 is one them. It is an option for the debtor, NOT the creditor. Look at Chapter 13: Guess who takes advantage of the 910 day rule? In that case, it's the lender.

Yes, you're right. They are taking 3x the KBB value and sell their cars for that. However, "Buy here, pay here" dealerships still fall under the same law. So no, they don't care about the KBB when selling - but will do so when they are forced into a redemption.

This particular lender would certainly make more money if I would surrender. However, once again, the law doesn't always care who makes more money. If that was the case, I would pay 100% APR or more and would have a balance of $30K on that loan (and couldn't redeem in the first place since the redemption-option wouldn't even exist because nobody gets richer due to it).

No, I don't believe they are going to sell the car at its value. I said earlier, they will do the same thing all over. But here's the catch: Their intention doesn't void my rights! Every lender tries to get the most out of a surrendered vehicle, so why does redemption even exist?

You answered the question, what difference the co-signer makes, by saying:

"because until she files BK, she is liable for the total loan, not the "value" based upon NADA or any other listing."

Sorry, that's no difference! If a redemption doesn't discharge her, she would be liable for the remainder of the loan as well. Where is the difference in her liabilities if I surrender or redeem?

And no, under my "plan", the lender gets a few additional payments and the redemption-value - NOT the $7K..

[justalayman]

I have no problem admitting when I am proven wrong and I have but;


just a couple of situations that may or may not present a problem;

Obviously, BK is not automatic but apparently still dependable as a near given but both of you would need to qualify in the worst case situation (or your "plan" as you put it)

the co-signer: is she a co-owner as well? A co-signer that is not a co-owner may not have the right of redemption since they never have any interest in the vehicle (should the situation go the way of your "plan").


I could not find how 722 applies where there is a co-signer. I can see where a court could simply put off the debt to the co-signer (as it is designed to be should the signer default). Is there some yet unmentioned section that does not allow you to redeem in such a situation. If so, does the co-signer hold any ownership rights to redeem.

I guess the best case scenario for you would be for you to be able to redeem under 722 which would allow the lien to be removed and if the balance is left intact as debt for the co-signer that it too would disappear when she files BK

stop back and let me know, if you would, the outcome of this.

Oh, and although you appeared fairly confident the time owned situation of 910 days, I would like to add I found no support for such limitation under chap 7 filing in my cruise.