Post by: Felonious Monk/Fignozzle on July 16, 2006, 11:59:17 AM
I've got a handle on everything for them with one exception, the car.
They (and the bank) own an '02 Pontiac Grand Prix SE with 77k miles on it, and owe approx. $9200 on the car. They also have a beat-up '92 Astro, ugly but reliable and blows cold A/C, and an older Toyota truck, so both commutes are covered.
I've suggested they divest themselves of the Pontiac, but they say they've tried to sell it and can't get anywhere close to the payoff out of it.
I mentioned they might consider just letting it be repossessed (at their request) by the finance company.
They already declared bankruptcy 2 years ago, so it's not going to do any particular damage to their credit rating.
Is this a course of action they can/should pursue?
I've never had a car repo'd, so I'm not entirely sure how this works.
What they can expect (will this cancel the debt? do they sell it at auction and bill them the remainder?) Is it any better for them to have voluntarily contacted the finance company to request that they 'come get it'?
Just not an area I'm familiar with.
Any help/advice would be appreciated, and you will know that you will be helping us help them.
Thanks,
Fig
Post by: grislyatoms on July 16, 2006, 12:45:23 PM
Bad idea.
The bank will sell it at auction then the kids will still be liable for the difference. Having it voluntarily repossessed might be SLIGHTLY better than the alternative, only because their credit report will not have 30, 60 and 90 day late marks on it, but it may not matter.
Repossession is almost as bad as a bankruptcy or judgement as far as credit goes, 90 day lates are almost as bad.
Any possibility of refinancing to lower their payment? That's probably their best bet. (Not what I would do, but I am not in their situation)
Good luck.
Post by: The Rabbi on July 16, 2006, 12:51:57 PM
What Grisly said. The finance co will sell the car for next to nothing and charge them the difference. How much are the payments on the car? They might do OK selling the car for whatever they can get and just making the payments on the rest themselves.
How much do they spend on meals out in restaurants. You'd be amazed how that stuff adds up.
Post by: TarpleyG on July 16, 2006, 01:26:11 PM
Greg
Post by: Declaration Day on July 16, 2006, 02:04:16 PM
I once had a car that I drove only in the summer. Full coverage for it was $155/month, storage coverage was only $35/month.
Obviously they won't be able to drive the car for a while. But you did say they have two other running cars, and it beats having the Pontiac repossessed.
Post by: BozemanMT on July 16, 2006, 02:34:55 PM
Quote from: Declaration Day
I assume that since there is a lienholder on the Pontiac, they have full coverage insurance. .
Wow, that gives me a bunch of ideasnone of which are the high road.
As others have said, sell it and eat the pain now rather than over time.
you'll save insurance, tags, the monthly hit, etc
it only depreciates more.
even if they had to come up with 2/3 grand
What does edmunds.com say is the value of the car?
Post by: Felonious Monk/Fignozzle on July 16, 2006, 02:52:16 PM
They owe $9200.
Might be able to to throw it out there for $7900 and take $74-7500.
That leaves 'em about $1800 or so to come up with. Not terribly likely, IMO, but they may really surprise me w/r/t the level of their motivation, and make it happen.
The only reason I agreed to do this was because the two of them both have hearts of gold, no real family support, and just need some mentoring to turn things around.
Guy works two jobs, plus picks up odd job stuff on the side so his bride can stay home full time with their 18 month old daughter. She does medical transcription (a little) when she's not chasing a toddler. #2's on the way for the holidays.
Sweet kids.
Post by: garrettwc on July 16, 2006, 06:33:03 PM
They are going to get hosed on the deal either way. Your numbers are correct for a "retail" sale. However, the lienholder will sell it at a wholesale repo auction. Depending on your states repo laws, that could be as little as 50% of the wholesale price on the car, or around $3000-3500.
Quote
They might do OK selling the car for whatever they can get and just making the payments on the rest themselves.
That's going to be tough to do. The lienholder is not going to release the title until they get all of their money. It's going to be hard(and in some states illegal) to sell a car you can't produce a clear title for within a certain amount of days, usually 30.
Post by: Brad Johnson on July 16, 2006, 07:15:37 PM
In short, they can replace their $400-ish car payment with a $200-ish short-term payment that will, in the end, get them where they need to be. The insurance savings alone should partially offset the payment. It may not be pretty, and any lender that will do it for them will charge dearly, but it will get them out from under it and keep what's left of their credit intact.
Which reminds me, did they file a total bankruptcy or a restructuring? If it's total, then they need to keep their noses very, very clean as their new credit history began, literally, on that date. If it's a restructuring, the banktruptcy is active until the upaid debts are settled and the bankruptcy is completely discharged. Having a reposession after a total bankruptcy is bad enough, having a repossing during an active restructuring is the kiss of death - financially speaking - for a minimum of 7 years.
Brad
Post by: The Rabbi on July 17, 2006, 01:58:41 AM
Post by: Headless Thompson Gunner on July 17, 2006, 10:30:47 AM
Quote from: The Rabbi
Garretwc points out rightly that the lienholder will not give clear title without it being paid off.
So they borrow the 2 grand they need in order to make up the difference to the bank. A $2,000 short term debt beats the hell out of a $9,000 long term debt. I would think that their bank would be willing make this happen, since it would be in their best interest, too.This couple put themselves behind the eight ball when they bought three cars with someone else's money. The best thing they can do now is get out from behind that eight ball as quickly as possible.
Sell the Pontiac, pay off the $2,000 loan as quickly as possible (if you can't do it in 6 or 9 months then you aren't really trying), eat the financial loss, and consider the whole mess to be a hard-earned life lesson.
Post by: SADShooter on July 17, 2006, 10:39:20 AM
Post by: Felonious Monk/Fignozzle on July 17, 2006, 11:33:43 AM
Quote from: Headless Thompson Gunner
Quote from: The Rabbi
Garretwc points out rightly that the lienholder will not give clear title without it being paid off.
This couple put themselves behind the eight ball when they bought three cars with someone else's money.Post by: BryanP on July 17, 2006, 12:03:46 PM
Post by: garrettwc on July 17, 2006, 06:08:45 PM
Quote
So they borrow the 2 grand they need in order to make up the difference to the bank. A $2,000 short term debt beats the hell out of a $9,000 long term debt. I would think that their bank would be willing make this happen, since it would be in their best interest, too.
Never happen HTG. You have a couple here, 2 years out of the Chapter 7, no credit score, and the repo truck is following them around waiting for the phone call.
The banks is going to release their collateral and make an unsecured loan for the balance due?
Even the shark lenders won't make that one.
If I'm the banker, my best bet is repo the car, sell it at auction and hope for an agreed judgement with voluntary wage garnishment.
These folks best bet is to cut costs, work both their tails off, and get the car paid down enough to sell their way out of it, then start hammering the other debts.
Post by: Headless Thompson Gunner on July 18, 2006, 05:34:11 AM
Quote from: garrettwc
Quote
So they borrow the 2 grand they need in order to make up the difference to the bank. A $2,000 short term debt beats the hell out of a $9,000 long term debt. I would think that their bank would be willing make this happen, since it would be in their best interest, too.
Never happen HTG. You have a couple here, 2 years out of the Chapter 7, no credit score, and the repo truck is following them around waiting for the phone call.
The banks is going to release their collateral and make an unsecured loan for the balance due?
Even the shark lenders won't make that one.
If I'm the banker, my best bet is repo the car, sell it at auction and hope for an agreed judgement with voluntary wage garnishment.
These folks best bet is to cut costs, work both their tails off, and get the car paid down enough to sell their way out of it, then start hammering the other debts.
Saving up the $2,000 needed to make the sale would work, and might be the only option if their bank won't cooperate. But it would take a lot longer and cost a lot more. They'll only be able to put whatever money they have left after servicing their $9,000 debt each month into their saving. They'll also have to cover the additional interest on the $9,000 debt, which increases the time it wil take them to pay off the big debt as well as the time it takes them to save up the $2,000 they need to sell the car.
If they borrow the $2,000 first, they'll be able to pay it off with the money they used to spend on car payments for the Pontiac, plus whatever they can scrape together. They'll pay much less in interest as well. This plan essentially allows the couple to pay off $7,000 of their debt immediately, and pay off the remainder under much more attractive circumstances. This is one of those few instances where a little bit of credit is a good thing.
Don't get me wrong. The couple needs to cut costs and work their tail off regardless of what they end up deciding. But I think their hard work will pay off faster by borrowing $2,000 and selling the car today.
Quote
They didn't. They've owned the van and the pickup for years, free & clear. Sorry if I was less than clear on that.
My mistake. Either way, it appears that they can't afford the Pointiac and probably shouldn't have purchased it in the first place. Best thing to do is to eliminate the liability as quickly and affordably as possible. Repo sale may be quick, but won't do as much to eliminate their liability since the repo sale won't bring in the car's full value.
Post by: The Rabbi on July 18, 2006, 06:53:20 AM
Quote from: Headless Thompson Gunner
If this couple is indeed a huge credit risk, then bank should be pleased to replace it's $9,000 high risk, long term loan with a $2,000 lower risk, short term loan. The new $2,000 loan wouldn't be unsecured, it just wouldn't be secured by that particular Pontiac. The bank would be reducing, not increasing, the amount of credit extended to the couple, and that's a good thing from the bank's perspective.
Saving up the $2,000 needed to make the sale would work, and might be the only option if their bank won't cooperate. But it would take a lot longer and cost a lot more. They'll only be able to put whatever money they have left after servicing their $9,000 debt each month into their saving. They'll also have to cover the additional interest on the $9,000 debt, which increases the time it wil take them to pay off the big debt as well as the time it takes them to save up the $2,000 they need to sell the car.
You've never worked for a bank.Saving up the $2,000 needed to make the sale would work, and might be the only option if their bank won't cooperate. But it would take a lot longer and cost a lot more. They'll only be able to put whatever money they have left after servicing their $9,000 debt each month into their saving. They'll also have to cover the additional interest on the $9,000 debt, which increases the time it wil take them to pay off the big debt as well as the time it takes them to save up the $2,000 they need to sell the car.
First off, the two lenders are not the same entity. Second, the car lender has a performing loan with decent collateral. Why would they give up that up? They won't.
All the folks who say the couple will never get a personal loan for $2k are right. I wouldnt make a loan like that. No one would. You have a couple with a demonstrated history of financial mismanagement. It will take a lot to overcome that. My advice is to sell one of the other cars, use the money to pay down the car note, work like dogs and cut expenses to pay the rest of it off.
Post by: AJ Dual on July 18, 2006, 07:27:34 AM
Eating out, take-out, cable/satellte TV, cell phones, broadband Internet, etc. you can "find" lots of money this way.
Even if cutting all non-essential expenses to the bone won't come up with enough money, they can put that money twoards the "emergency cushion" and try to start assembling a savings account and getting the three months of salary together.
Having that cushion for unexpected expenses like car repairs or medical bills will keep them from getting in the hole again in the future.
It's a shame about the car, assuming it's on a five-year note, they're just to the point where they're seriously digging into the principal of the loan.
To "get out" of the car, I would suggest trying saving up a few hundred in down payment cash, then trade in the Pontiac for a reliable (Asian) used car, and throw in the truck if it's got any trade-value at all. (Keep the mini-van for transporting the kids...) The only way out of the note on the Pontiac right now is a dealer, IMO...
I would also be sure the new-used car is an econo-box, the way gas is going these days. I think long-term the best we'll ever see again is $3/gallon, long-term, and it could well spike to $5/gal this year over the Middle East.
If financing is a problem, can they get a co-signer? A decent rate at a credit union with a relative would help. Especialy if thier car loan is high-risk, because it sounds like they bought it when their credit was bad to begin with.
Doing this on the term of the new loan will likely cost them more than the remainder of the Pontiac note in the long run, but it would free up monthly cash for other obligations, and once they pay a few of those down, if they have the discipline to pay the extra cash back to the "new" used car loan, they could get out of the loan early, and it might actualy cost them less than the Pontiac.
Post by: K Frame on July 18, 2006, 07:29:39 AM
The only other option MIGHT be to get a loan against the value of the truck, sell the Pontiac and use the loan proceeds to pay down the residual.
That, however, is risky as hell, the interest rate is going to be high to obscene, and likely the only ones who will lend the money are going to be the predatory lenders, where if you miss a payment by even a day you default on the collateral and still owe they money on the loan. Not a good situation.
One other option may be of assistance in the long run...
Are they eliglble for membership in any credit unions -- through work, local community, church, etc? If so, they should investigate membership as often credit unions provide a whole slate of services for people who are in financial trouble.
The best options would be Navy Federal, Pentagon Federal, or one of the other really big credit unions. In this case, bigger is better, as the larger credit unions (especially the ones dealing with service members) have a wealth of experience in helping people who are on the edge financially.
Post by: Headless Thompson Gunner on July 18, 2006, 07:41:19 AM
Quote from: The Rabbi
Quote from: Headless Thompson Gunner
If this couple is indeed a huge credit risk, then bank should be pleased to replace it's $9,000 high risk, long term loan with a $2,000 lower risk, short term loan. The new $2,000 loan wouldn't be unsecured, it just wouldn't be secured by that particular Pontiac. The bank would be reducing, not increasing, the amount of credit extended to the couple, and that's a good thing from the bank's perspective.
Saving up the $2,000 needed to make the sale would work, and might be the only option if their bank won't cooperate. But it would take a lot longer and cost a lot more. They'll only be able to put whatever money they have left after servicing their $9,000 debt each month into their saving. They'll also have to cover the additional interest on the $9,000 debt, which increases the time it wil take them to pay off the big debt as well as the time it takes them to save up the $2,000 they need to sell the car.
You've never worked for a bank.Saving up the $2,000 needed to make the sale would work, and might be the only option if their bank won't cooperate. But it would take a lot longer and cost a lot more. They'll only be able to put whatever money they have left after servicing their $9,000 debt each month into their saving. They'll also have to cover the additional interest on the $9,000 debt, which increases the time it wil take them to pay off the big debt as well as the time it takes them to save up the $2,000 they need to sell the car.
First off, the two lenders are not the same entity. Second, the car lender has a performing loan with decent collateral. Why would they give up that up? They won't.
All the folks who say the couple will never get a personal loan for $2k are right. I wouldnt make a loan like that. No one would. You have a couple with a demonstrated history of financial mismanagement. It will take a lot to overcome that. My advice is to sell one of the other cars, use the money to pay down the car note, work like dogs and cut expenses to pay the rest of it off.
I have some friends who were in a similar situation and did essentially what I've described. They didn't have undue trouble getting the loan they wanted. My banker wouldn't hesitate to give me this loan, even if I did have poor credit.
This loan shouldn't be impossible to get. Surely this couple has something of value they can use as security. They own their other two vehicles outright, don't they? Do they own their house? Cripes, they could put $2,000 on a credit card and still come out ahead.
Oh well. It ain't my life, so I won't worry about it.
Post by: 280plus on July 18, 2006, 08:02:56 AM
Post by: Brad Johnson on July 18, 2006, 08:13:08 AM
Brad
Post by: mtnbkr on July 18, 2006, 08:24:04 AM
Chris
Post by: garrettwc on July 18, 2006, 10:38:25 AM
Normal practice at a dealer if you let them do the financing is to send the "deal" out to several lenders, based on your knowledge of their practices, and hope to get multiple approvals so you can pick the one with the highest discount (profit) rate for the dealer.
It wasn't unusual to get one that would buy 100%, a couple 70-80%, and a couple of turndowns, on the same customer, on the same car, on the same day. And this was people who had 5+ years on the job and owned their home.
Every major lender has their "plan" and if it doesn't fit "the plan" it doesn't happen. The rare exception would be if the car was financed by a "local" whom they had a relationship with such as the one you described.
Post by: Felonious Monk/Fignozzle on July 18, 2006, 06:24:23 PM
The lender, IIRC, is HSBC or HBSC out of Dallas/Ft. Worth.
Sorry to not have better, more accurate info.
Ben/Fig
Post by: Brad Johnson on July 19, 2006, 06:41:35 AM
Have the kids call the lender. See if the lender would entertain the idea of letting them sell the Pontiac outright and take up a small, short-term note against one of the other vehicles to cover the difference. I bet they will work with them (since the only alternative is an expensive and prolonged repossesion procedure).
Brad
Post by: The Rabbi on July 19, 2006, 07:38:31 AM
My wife works for a bankruptcy trustee, administering claims etc. You wouldnt believe how often a case has money in it and if the credit card lender would just submit a proof of claim he would get paid. Sometimes the whole amount. And they dont. Even when they are told there is money in the case.
Post by: Brad Johnson on July 19, 2006, 10:48:05 AM
If they've kept their noses clean on the payments and aren't currently behind, the most lenders would welcome the opportunity to get all their money back in the easiest possible way.
Brad
Post by: aguyindallas on July 19, 2006, 05:47:57 PM
The ABSOLUTE worst thing they can do is let that car repo! If they already have filed BK, they NEED any bit of re-establishment in the credit world they can get. In fact, if it came to it, screw all the credit cards and keep paying that car payment.
You just have to trust me on this...I make a living in this world of finance.