A common concern of people who are considering bankruptcy is what will happen to their car. After all, without a car you won't be able to get to work, buy groceries, or do any of the other things that help you earn a living.
Sometimes people in a financial crisis look to quick fixes, like deferring payments, or borrowing money, to help them make ends meet. But the truth is that unless your income has gone up substantially you may be setting yourself up for an even bigger failure.
Fortunately, bankruptcy law and the legal process surrounding it understands your need to get around, so keeping your car shouldn't be a problem. But it can get tricky.
I'm Behind on Payments. How Can I Keep My Car?
If this truly is the only payment you've gotten behind on, and your income has increased, or your expenses have decreased, your best bet might be to work with your loan company.
Explain the situation and ask for arrangements to get current on the loan, for example adding the missed payments to the end of the loan.
Keep in mind that while this may allow you to keep the car and avoid bankruptcy you will likely end up paying more than the original loan amount with the added fees and interest charges.
If You've Been Having Trouble Paying Several Bills, Including Your Car Payment
Say you are having trouble making ends meet, in part because your credit card payments and other personal loans have grown. If, like most people in your situation, you've been moving money back and forth to keep current on bills, filing bankruptcy is probably your best bet for getting out of the hole.
How does this apply to your car? Bankruptcy won't wipe out your car loan, but bankruptcy laws consider the fact that a car is necessary to earning an income. Bankruptcy could reduce or eliminate your personal debt, allowing you to make your car loan payment.
If you think you'd be able to keep up with your payments if they were reduced and reorganized, you might consider a Chapter 13 bankruptcy.
A Chapter 7 bankruptcy, on the other hand, may allow you to eliminate some of your debts, giving you the ability to keep making payments on your car.
But with so many factors involved, you should consult an experienced bankruptcy attorney before taking action.
Beware that your options diminish rapidly once the loan company moves to repossess, so call today.
If you're not able to commit to making the car payments
If you're in over your head with your car payment you have a couple of options:
- If you have a good amount of equity in your car, consider selling it. You can then use the proceeds to pay off the loan and purchase a less expensive car.
- Consider whether you have other assets you can sell to pay off the loan.
But if like many people, you don't have assets you can sell, and you owe more on your car than it is worth, bankruptcy might allow you to keep driving the car while your loan is either reorganized under Chapter 13 or even cancelled under Chapter 7.
An experienced bankruptcy attorney can guide you to the option that puts you in the best position moving forward.
If you're being threatened with repossession and want to keep the car
Call a qualified bankruptcy attorney right now.
Seriously, they may be able to stop any repossession action before it happens!
In many cases just knowing the law can allow you to avoid repossession while you make arrangements to pay.
Or if you decide to file bankruptcy, this action results in an “automatic stay,” which means that creditors can not repossess your car, and can't even call or harass you while the bankruptcy is being processed.
While you may have considered bankruptcy a “last resort,” you would be surprised how this government-provided protection is there to help people just like you. It should be considered the “first resort” in many cases.
It's always an option to call your loan company and make arrangements to catch up on the balance you owe, but this is rarely an option for those who have fallen behind.
If Your Car Has Been Repossessed and You Want it Back
If you've already had the unfortunate experience of watching your car get towed away by the repo man, you may not be out of luck. If your car has been repossessed it is possible to force the creditor to return the car. However you need to call a bankruptcy lawyer immediately while you may still have options.