According to Quartz.com, more than six million Americans are currently delinquent on their car loans, which is a new record-high since the 2008 recession. Banks are more willing to take on risk since the economy has recovered, but many more Americans are also at risk of losing their vehicles to repossession. Therefore, people who are currently paying loans on their vehicles should be aware of the actions lenders can take against delinquencies.
Lenders can repossess a vehicle, and then sue the owner for the remaining balance
Car owners are probably well aware that a lender can repossess a vehicle, but the consequences of delinquency may not stop there. Because vehicles depreciate in value quickly, the lender’s resale value of the car may not cover the balance on the loan. Therefore, a lender could sue the borrower for the remaining amount through a process known as “car deficiency.”
How can I protect my vehicle from repossession if I am behind on my payments?
Borrowers who face a car deficiency judgment can seek the help of a bankruptcy attorney, but there are other legal tools available for car owners who want to avoid repossession and deficiency altogether. What’s involved in this process?
The basics of Chapter 7 bankruptcy
Falling behind on bills such as a car payment can be an early warning sign of bankruptcy. If a few missed payments turn into delinquency, borrowers can use the Chapter 7 bankruptcy process to keep their car and other essential assets.
Bankruptcy is a legal tool to liquidate debt and get a fresh start on finances. Although some assets may be lost in this process, the law allows borrowers to keep some necessary items like a home or a car to help maintain balance after filing. In Chapter 7 bankruptcy, borrowers may keep a vehicle as appropriate. However, this exemption may not include a second or third vehicle or luxury car.
How to learn more about preventing repossession
Borrowers who are falling behind on their car payments should not wait until delinquency or repossession to seek help. Advice is available from a bankruptcy attorney. Borrowers can see if they qualify for Chapter 7 bankruptcy and discuss legal ways to keep a vehicle in danger of repossession.
With more Americans in danger of losing their vehicle, more should also be aware of the ways to prevent repossession while finding a path to a clean financial slate.