I just read another post on here and it looks like I can get some really good info. Here goes... Name is Matt and I live in Minnesota. I have a 2007 Honda Civic SI Sedan that I owe about 22k on because of rolling a bit of my last lein into the current one. My credit at the time was pretty weak so in order for me to purchase the car I had to convince my mom that I was going to be the responsible son and not screw up. Well, to make a long story short, I did. I'm in the begining stages of a Chapter 7 filing and the car will need to go. Mom is looking at building a house next summer and I can't afford to ruin her credit. She asked the lady at her credit union about the situation and she mentioned a voluntary reposession. When I asked my lawyer about it he said that thats possible, but because she co-signed on the car, she would ultimately be responsible for the remainder of the lein after the car was sold/auctioned and I would not be able to put the remainder into the filing as an unsecured debt. I can probably only get about 18-19k selling it to a private party. Any helpful info out there? If you need more info, please request and I will update as soon as possible. THANK YOU!!! Matt
It will effect her as much as you no matter which way. I am against a voluntary repo because it will show you gave the car back and agreed to allow them to come after you and her for the balances of the default. This is not a good situation for her at all, she is kinda stuck. What I would do if I were here and she doesnt want the ding on her report I would do whatever I could do sell the car for the highest amount, borrow the left over amount at the CU and make you make the payments to her. This is all based on her wanting to buy a house and dont want dings on her report. Now, since you are wanting to file Ch 7, why is this not part of that? Also, if you do get to file 7, then you should be able to pay mom back the balance left over without any problems so she wont be responsible. Guess I am wondering why the car dont go in with the chapter 7 as it will be allot easier to deal with that way then repo before the ch 7 and hurt your mom as well. The most important thing is how to make sure mom doesnt get effected by your decisions, no matter what you got to do, you should find a way to protect her first and you last.
This is going to effect her credit one way or another, here are the steps you both need to go through: 1) Find out the "pay off" amount of the auto loan from the CU. This is what it will take to close the loan. 2) Try to sell the car as quickly as possible. Even if you do not have any "lates" on the loan, the $22K debt will hurt her mortgage application by raising her debt to income ratio. You both need to close the auto loan (make it a $0 balance) before she applies for a mortgage. 3) The both of you need to check your credit reports with all three agencies, to determine how this account is reporting (any negatives). Your mother should be doing this anyway before she applies for a mortgage. 4) I would start looking around your home for items to sell to try and raise the balance due. It is said the avergae person has about $3,000 lying around in stuff they do not use. 5) Negotiate upfront with your mom's CU how this account will be reported to the credit reporting agencies: forewarned is forearmed.
One side of the equation is income. As Bizwiz said, you can sell some stuff. Or get another job somewhere, even if it's at 7-11 or McDonalds. Also, look to cut expenses. Cut your cable. Take lunch instead of eating out. Lots of little things to put some extra cash in your pocket. But yes, you need to sell the car and get it paid off. Then get a much less expensive car. It may not look fancy, but right now you should only be worried about getting from point A to point B.
Thanks to everyone for all of the info. I was e mailed by another member of the forum. Here was his advice. Trade the car for a much less expensive car, and roll the negative equity into the 'new' car. Is that a decent option? I have thought about this and if this were to happen, I would have to drive the 'new' car until the wheels fell off. I am 23 and I have never actually owned any of my vehicles. I would LOVE to not have car payment, as I'm sure many of us would. So do I trade for a car worth about 6k-7k?
No, doing that just makes it worse. This is partly how you got into this situation in the first place. You should never be "upside down" in a car loan. Suppose you have an accident. The insurance company will pay the loan company the value of the car. Now you have to pay them the rest, and still come up with a down payment for the next car. Suppose you have a major problem like an engine blowing or something. You now have a major repair bill AND the car payment, or you have to do the same thing again. At some point the negative equity will be so high that no one is going to finance you. Besides, you would still have a fairly high payment. How upside down are you (how much negative equity)?
The problem here is that you also may not qualify for a new loan, even on a much less expensive car, and you'll have to qualify for an amount about twice the value of the car! If you mother can handle the shortfall in cash for a while, I would sell the car, get what you can for it ASAP. Then if your mother can finance the balance owed on the loan, have her pay off the loan balance. You then buy a true "beater" car, and make the "old payment amount" to your mother to pay her back ASAP. Sorry, but you have to bite the bullet on this one. You're young, live and learn from this.
That's true. You need to learn that you can't have everything you want, when you want it. You need to bite the bullet and wait until you can afford a new car to get one. There's nothing wrong with a "beater." The purpose of a vehicle should be to get you from point A to point B. Sell the car, get something cheap, get another job, pay off your mother, and get on with life. When you can afford to put 15-20% down on a new car so you're not upside down, and you can qualify for the loan on your own, then and only then should you be getting a new car.
mnwils fan2... What caused you to fall so far behind in the payments on this car loan? What does your total financial picture look like?
Well, I'll try and make this story as short as possible. When I was 18, I made probably the biggest mistake that you can at that age... believe all of the credit card mail that you get. I had 3 credit cards with a total of 8000 limit. At the time, I thought I was so cool. "Yeah, just charge it." It was so easy. Everything was pretty much ok for the first year or so, then I bought a computer, a motorcycle, a new car. And thats where the credit card payments started to slip. I'm not 100% sure what the hell i was thinking, but I just decided that not paying for the computer financed thu Dell and the motorcycle financed thru my bank would allow me to make payments towards the cards. Of course my next mistake, the minimum. So the bike was repoed in 2004 I believe, not a big deal cause I wasn't riding enough and it needed a bit of work after I laid it down at about 70mph. So I started getting calls form my card companies, they finally decided it was not worth their time, and charged them off. I can tell you first had that you can only run for so long. It got to the point where I was getting settelment offers from these collection agencies ranging anywhere from $800 to $2500. (But the check had to be by the end of the week) Now if I truely had that kind of money laying around, do you think I would be on the phone with these people... honestly... what a joke. So then 2005 rolls around, I meet the girl I am currently with, and she get pregnant, not planned, but on the other hand, not prevented either we both knew what could come out of it, and we were alright with that. Not a bad thing at all, and one thing I would never change about my life. She was working at a hospital making decent income and helping with bills, rent, groceries etc. About 7 months into her pregnancy, she gets let go from work because she missed about 2 days a week going to a doctor with "strange feelings." I understood because it was her first and my first and neither of us really knew what was exactly supposed to be happening. She has been out of work since, coming up on 1 yr. My daughter is now 6 months old. We have been living paycheck to paycheck off of my income. NOT AN EASY TASK. My last two checks were garnished for my largest credit card debt and now its impossible. My bankruptcy case should be filed early next week and the garnishment should be terminated before my next paycheck. Holly, my girlfriend, is working on setting up a nanny job so that should be a help as well. But all in all, I made some mistakes and all I can do is brush it off, learn form it, and don't get back to old ways. Right now I'm just trying to simplify my life really. We are moving out of our townhouse to cheaper living quarters, I'm stil trying to figure out what to do with the car, I got out of a commissioned paid job and went to salary base so budgeting will be easier, we are selling her Jeep, canceled cable, got a hook up from the neighbor (business owner) for our garbage removal, changed up our cell phone plan, take lunches to work, don't make unnecessary trips, and every time I look at something I think I need, I take a step back and say, out loud, I'm NOT kidding ;-), "Is this a need or a want." Its so much easier when saying those few words what clicks in your mind and says "GET THE HELL AWAY FROM THAT, YOU KNOW YOU DO NOT HAVE MONEY TO BE PISSING AWAY." I hope that we can be back on our feet in about 3 months, but its going to take a bit of work from the both of us. Sorry for the rant, I thank you for reading. Have a wonderful money saving Sunday!!! Matt
Well, I'm glad to see that you are taking some positive steps. You're doing many of the things I always tell people to do. You canceled the cable, take lunches, and have learned the difference between needs and wants. I commend you for that, and I hope you continue to evaluate what you really need as your situation improves. As soon as you can, start putting as much as you can in a retirement account. The earlier you start, the better off you'll be in later years. For now, if you could get a second job some evenings or weekends, even if only for a few months, it will help you get through this. And when you do, please stick around and use your experiences to help educate others.
Another thought on the auto loan... Is there anyone you know who might "take over" the auto loan? Perhaps the car would cost less than at a dealership right now, and somehow you can work out a deal which benefits both of you. Just another idea.. But, it appears you've had some tough times here. I'm sorry for your troubles, and I know how difficult life can be sometimes. Do what you have to do right now, and work a plan to get back on track. Any other problems or questions, please don't hesitate to ask, we're all here to help, and we've all been there.
