Ford Credit Has the Right to Pick Up You Car When you File Bankruptcy, Even If You Are Current.
Actually, under the 2005 bankruptcy reform, any car finance company can pick up your car when you file bankruptcy. But Ford Motor Credit is the only national lender that does that. (A few states have laws that protect you. Virginia, where I am, isn’t one of them.) Most lenders would rather get payments than get the car.
Ford wants to you to reaffirm your debt with them. When you reaffirm, you take the debt complete out of the bankruptcy. After a short waiting period, you can’t change your mind.
As your lawyer, I don’t like reaffirming debts. If you reaffirm and can’t make the payment, you get an after-bankruptcy repossession on your credit. An after bankruptcy repossession pretty much guarantees seven years with bad credit. An after bankruptcy repossession (on a reaffirmed car) probably means an after bankruptcy judgment and an after bankruptcy garnishment. A real mess.
I don’t like reaffirming your car loan with Ford Motor Credit. On the other hand, you may not like walking to work.
On the other hand, you probably don’t want to walk to work.
So before you reaffirm with Ford Motor Credit, I’m going to ask you some questions.
Are you really happy with this car? Has it shown any signs of mechanical trouble?
Do you have some other way to get around? Do you have a junker that will be good for a year or two, until you get good credit?
Could you in fact get around on bus or Metro for a while?
Did Ford give you a really good deal when you bought this car.
After we talk about all that, maybe you’ll decide to let Ford take the car. If you insist, you and I will sign the reaffirmation and Ford will let you keep the car. (As long as you keep up the payments.)
Because reaffirmations are so dangerous, the law requires your lawyer–that’s me–to sign off that I think it’s a good idea. (Usually, I don’t think it’s a good idea. “Let them eat steel,” is what bankruptcy lawyers like to say.) And many people also have to explain it in person to the judge. Because of the long and annoying paperwork, here, and possible court appearance, I charge another $200 to handle car reaffirmations with Ford.
If you give the car back to Ford, it won’t take that long to buy a new one at a good price.
I tell people to wait three years, if possible, after the bankruptcy, in order to get the best deal on new car financing. (And whatever you do, do NOT go out and finance a car at 21% the week your bankruptcy is final.) But even a year and a half after bankruptcy, you can rebuild your credit and get a car loan at a good rate. Alice got a Nissan, from the dealer, at 4.76% barely a year after.
Usually, unless the dealer is having trouble selling cars, you’ll get your best rate on a car from a credit union.