Car Repossession and Bankruptcy
The Walker Law Firm works with bankruptcies in the Greater Dothan, Alabama area. We may be able to help if you have fallen behind on your car paymentsIf you have been having difficulty making car payments as a result of job loss or reduction in hours, or you are finding that the weight of other expenses is making it difficult to maintain your car payments, bankruptcy can possibly offer relief from the threat of having your vehicle repossessed.
Your options for a personal bankruptcy filing are Chapter 7 and Chapter 13. Either
way, the most immediate form of relief is the Automatic Stay. The Automatic Stay places nearly all
collection activity, including collections on auto loans, on hold. The holder of the auto loan is temporarily barred
from resuming collection activity.
Your options will likely depend on which type of bankruptcy filing is right
Your options for a personal bankruptcy filing are Chapter 7 and Chapter 13. Either way, the most immediate form of relief is the Automatic Stay. The Automatic Stay places nearly all collection activity, including collections on auto loans, on hold. The holder of the auto loan is temporarily barred from resuming collection activity.
In some cases you may be able to keep your car and in others you could make a fresh start and get out from under the weight of owing much more than your car is worth.
Chapter 13 and Repossession
With a Chapter 13 bankruptcy filing one of your options could be arranging to keep your car as part of a repayment plan that is approved by the Bankruptcy Court. This process is known as reaffirming the debt and the repayment period usually lasts for 3 to 5 years. You would need to continue making payments on your car and arrange to repay any past due amounts including interest. As long as the payments are consistently made the auto lender cannot repossess the vehicle. If payments are missed, the lender can resume collection activity including repossession.
Other options may be possible under Chapter 13 such as redeeming the vehicle for the value of the car in a lump sum as opposed to paying the amount owed which can often be much higher. In some cases you may be able to renegotiate the interest rate may or have of the length of the loan be extended so that the you can repay the amount owed while staying within your budget.
Chapter 7 and Repossession
Under Chapter 7 you have the option to reaffirm your auto loan but depending on your circumstances, you may want to consider surrendering your vehicle to the lender, especially if the amount owed is much higher than the car's value. If you meet the means test for Chapter 7, any amount owed on the remaining balance for the auto loan, including interest and collection fees, can be discharged at the conclusion of the bankruptcy proceedings. This option can be especially attractive if the amount owed is significantly higher than its value, but also if the car has high mileage and may be in need of costly repairs. It is important to keep in mind that if you choose not to reaffirm your car loan, the lender can resume collections and repossession activities.
Surrendering your vehicle under Chapter 7 doesn't mean that you will be unable to obtain another car. Some lenders are willing to work with people filing for Chapter 7 during and after the bankruptcy proceedings. While bankruptcy does stay on your record for a number of years, financing isn't always out of reach. Lenders who are willing to work with people during or immediately following bankruptcy will charge a higher interest rate but it still may be a better option than making payments on a car with high mileage and little value that may be in need of repairs as well.
While taking on a loan for another car at a high interest rate may not seem like the best idea, it does offer you a chance to rebuild your credit by making consistent, on-time payments. This may be more feasible than some would think especially when non-secured debts are discharged, which can free up your budget to make monthly payments more easily. In many cases after one year of consistent, on-time payments are made it is possible to refinance your auto loan to a lower interest rate.
I'm not sure which option is best, can a bankruptcy attorney help?
If you plan on keeping your vehicle you do need to consider whether you can afford to maintain the payments and whether it would be worth it given your car's age, condition, as well as your own individual needs.
An experienced bankruptcy attorney can help you figure out which option may be best in your case and will advocate on your behalf when it comes to dealing the Bankruptcy Court and your lenders. We are a Dothan, AL Law Firm. If you are struggling to make your car payment, accumulating overdue bills, or if you have any questions on bankruptcy, contact us today for a FREE consultation!