For most of us our cars are critical to the way we live our lives. From getting to work, to getting the kid to school, to buying groceries, most of us rely on our cars.
It can be frightening when you cannot afford to make your car payment. Especially if you have missed more than one payment and your car is on the brink of repossession.
Understand that your car loan is a secure debt. This means that your car loan is backed by the car itself. If you do not make your car payments, the lender has the right to repossess the car.
Cars That Are Repossessed
After a lender repossesses a car, typically they will sell it at auction. A car sold at auction generally sells for significantly less than the fair market value of the car. When a lender sells a car for less than the amount owed on the loan, it can create a serious problem.
Depending on the terms of your car loan, the lender may be able to take collection action against you for any deficiency between the amount you owe on the vehicle and the amount it sells for. For example, if you owe $15,000 on your car loan, and it is repossessed and sold at auction for $10,000, then your lender may have the right to come after you for the $5,000 deficiency.
If your car is about to be repossessed you have a few options.
Become Current On the Loan
If your car has not yet been repossessed, you can stop the repossession by making up all of your missed car payments.
Unfortunately, if the car has already been repossessed, it is unlikely the lender will give the car back even if you can make up your missed payments.
Contact Your Lender to Discuss Options
You may have the ability to set up a payment plan with your lender to make up missed car payments. It doesn’t hurt to ask – the worst they can say is no!
Contact your lender and see if they’ll work with you to help you save your car. Some lenders may be willing to work out a payment plan with you to make up missed payments provided that you can also continue to make the current monthly payment in full, as well.
Let The Car Be Repossessed
If you cannot afford your car payment and/or cannot catch up on missed payments, you have the option to let the car be repossessed. As explained above, if there is a deficiency on what the lender sells the car for versus the amount you owe on the loan, per the terms of the car loan your lender likely has the right to take collection action against you for the deficiency.
If it comes to that your options include paying the deficiency, negotiating a settlement on the deficiency, or filing for bankruptcy.
Considering Bankruptcy – Temporarily or Permanently Stop Car Repossession
If you have debt problems beyond missing your car payment, it’s time to consider if bankruptcy is the right solution for you.
Filing for bankruptcy can stop (at least temporarily) the repossession of your car. As soon as your bankruptcy case is filed, all collection action must stop including car repossession.
However, understand that stopping the repossession by filing bankruptcy may only be a temporary solution. To avoid repossession permanently, you must make up the missed car payments directly to the lender, or through a Chapter 13 repayment plan. If you’re in the greater Savannah area, meet with us for a free consultation and we’ll explain how this works!
If your car is about to be repossessed, or has already been repossessed, contact us (912) 351-9000 to discuss all of your options.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.