In this article, we will discuss some of the facts related to Bankruptcy and Car Repossession. Then we will discuss in brief the basic steps which can be taken for the car being repossessed.
Bankruptcy and Car Repossession
According to the Washington Post, “a record 7 million Americans are three months or more behind on their car payments” as of February 2019 report.
That is all that needs to be said. And in other words: You’re not alone if you’re considering filing for bankruptcy and have fallen behind on your car payments but still want to keep your car.
An article published in the May 2019 edition of The Credit Union Journal is titled “In avoiding subprime auto loans, are Credit Unions shunning their roots?”
It can be found here. It turns out that defaults on auto loans have reached historic highs once again. For lenders, this is a problem that affects them all over the country, not just here in Ventura County or Los Angeles County.
There are legal options available to you if you want to keep your car from being repossessed.
Many consumers are unaware that filing for bankruptcy under either Chapter 7 or Chapter 13 of the United States Bankruptcy Code can prevent your car from being repossessed by your lender.
This is due to the fact that during bankruptcy proceedings, the court issues an “Automatic Stay,” which prohibits and prevents the lender from repossessing your car.
When a lender requests that the ‘automatic stay’ be lifted, the court may grant the request, and if the court grants the request, the lender may repossess the car.
However, this temporary stay may be sufficient to draw the lender’s attention and ask it to collaborate with you and your attorney on a modified repayment plan.
Being in contact with your car lender, and doing so through a bankruptcy attorney, is the best way to deal with this situation because it will carry more weight.
It also prevents the lender from attempting to intimidate you. Your attorney can help you renegotiate the terms of your loan and set up a new payment schedule, allowing you to keep your car while filing for bankruptcy.
Consider, if you will, that lenders do not really want to repossess cars; they are not in the automotive business; rather, they are in the lending business; they simply want to be paid, in accordance with the terms of the loan agreement.
If they realize the realization that this isn’t going to happen, they will weigh their options and decide what is in their best interests.
Consider whether a lower interest rate, lower balance, or renegotiated terms are preferable to a repossessed used car that has lost its resell market value due to wear and tear and depreciation for the lender.
Because let’s face it, lenders don’t want to lose any more money than is absolutely necessary.
Another important point to remember is that the ‘automatic bankruptcy stay is only temporary, and if you haven’t been making timely payments, you can expect your lender to demand the return of your car or to repossess it once your case is completed. Also keep in mind that the stay is only in effect during the bankruptcy proceedings, which for Chapter 7 last approximately 3 months.
The most effective method of preventing car repossession during bankruptcy court proceedings is as follows:
- Make the necessary payments.
- Make up for a late payment
- Create a repayment plan and ask it to the court for approval.
- Stay that you keep in contact with the lender through your attorney.
- Ask about assistance. Perhaps only a couple of payments will be subject to interest.
- Renegotiate the terms of the car loan
Ask the court about the possibility of purchasing your car back for its fair market value (Redeeming Your Car under Chapter 7 Bankruptcy Law).
In Chapter 13 bankruptcy, speak with your bankruptcy attorney about ‘cramdown’ strategies to ask for debt.
When Your Car Is Repossessed Prior to Your Bankruptcy Filing Date, What Should You Do?
Ask your bankruptcy attorney about assisting you in developing a repayment plan so that the lender can receive the missed payments.
Immediately contact an attorney if this has happened to you and your car has already been repossessed. Now is the time to contact your bankruptcy attorney. That’s probably the best piece of advice anyone could give.
All in all, it was a great day!
To protect your interests and understand the motivations of your lender, you must be aware of your rights. You require the services of an experienced bankruptcy attorney who will work exclusively for you and who has dealt with the local lenders in Ventura and Los Angeles County.
An attorney who understands the situation and has years of experience. It is possible to keep your car, prevent humiliation, and prevent losing access to transportation if you employ the proper strategy. After all, you live in California, and you will require a car.
You may also like our post related to Bad Credit Loans in the USA.