Bankruptcy and Auto Loans

File Bankruptcy And Stop Hiding From the Repo Man

Did you know that filing bankruptcy will automatically take your name off the repo man’s list? That’s right. . .bankruptcy can save your vehicle from repossession!

If you have a car, truck, motorcycle, SUV, minivan or any other vehicle and you are behind on your payments, we know how worrisome it can be. The finance company doesn’t care why you’ve fallen behind. . .they just want their money. They will call you repeatedly trying to browbeat the money out of you, oblivious to the fact that if you had the money, you would pay. You want to explain your situation, but they won’t listen and finally, they begin threatening you with. . .REPOSSESSION.

Will you open your door in the morning and find that your car has been repossessed? Will you step in to the parking lot at work and find that your car is gone? How long can you go on trying to hide your vehicle from the repo man?

The finance company is not there to help you. Those collection agents on the other end of the phone. . .well, they often get paid by how much they collect. It’s not their job to tell you your rights or to help you find a viable solution. Their only job is to collect the payments you agreed to make when you signed that financing agreement. And because the size of their paycheck depends on whether you send in a payment, they will say anything, oftentimes using threats, insults, and lies to intimidate you into coughing up money you need to feed your children or keep a roof over your head. If you still don’t pay, your car will be repossessed. They don’t care that without a car you can’t get to work or go out and find a new job. They don’t care that without a car, you can’t get you kids to and from school. Money. . .that’s the bottom line; you pay or they’ll repossess your car.

What the finance company and their collection agents absolutely don’t want you to know is that filing bankruptcy stops the repo man in his tracks. Under the law, once you file bankruptcy, the automatic stay prevents your finance company from calling you, writing to you. . . and from repossessing your car. In order to repossess it, the finance company must first obtain permission from the court.

Chapter 7 Bankruptcy and Auto Loans

If you file a Chapter 7 case and have an auto loan, you have three choices. You can reaffirm the debt, redeem the vehicle, or surrender the vehicle.

Reaffirmation is an agreement between you and the finance company whereby you are allowed to keep your car in exchange for making payments under the terms of the original loan agreement or pursuant to modified terms. If you reaffirm your auto loan, that debt will not be discharged. This means that if you later default on the debt, the finance company can repossess the vehicle and come after you for a deficiency judgment if they sell the car at a loss.

Reaffirmation is voluntary; your finance company cannot force you to reaffirm your auto loan. However, if you are behind on your payments, reaffirmation is your best bet for being able to keep you car. If you choose to reaffirm your auto loan, you may rescind (cancel) the agreement at any time prior to discharge or within 60 days of the date the reaffirmation agreement is filed with the court, whichever occurs later. To rescind a reaffirmation agreement, you must file a written notice of rescission with the bankruptcy court and forward a copy to the creditor.

Keep in mind that if after paying your auto loan payments, you are in a negative cash flow position at the end of the month, there is a presumption that reaffirmation will create an undue financial hardship for you. In such cases, you will have to prove to the court that not being allowed to reaffirm the debt would create an even greater hardship for you or that you will have assistance in paying the debt before it will approve the reaffirmation.

Redemption allows a Chapter 7 debtor to reduce the payoff on an auto loan to the present value of the vehicle. This is an attractive option for anyone who is upside down in an auto loan. In most instances, the redemption price must be paid in a lump sum. However, there are companies which specialize in making redemption loans and the bankruptcy attorneys at Advantage Financial Services can help you explore this option.

Surrender allows a debtor to return a vehicle to the auto finance company and simultaneously eliminate exposure to a deficiency judgment. If you have an auto loan with particularly high payments and are not interested in reaffirmation or redemption, surrender is a good option for you.

Chapter 13 and Auto Loans

If you file a Chapter 13 case, you will be allowed to keep your car as long as your Chapter 13 plan sets forth how you will pay for it, you need the car, and it is not an extremely expensive vehicle. This is true even if you are behind on your payments.

The thing about auto loans is that many times they are designed to make you pay way more for the car than it is really worth – sometimes as much as five to six times more. But Chapter 13 bankruptcy provides a way around this. Under certain circumstances, you may be able to reduce your interest rate and the monthly payments on your auto loan. What’s more, you may even be able to reduce the total amount you owe on the loan.

Let Us Help You Keep Your Car

No two bankruptcies are the same and there is no way that we can guarantee you’ll be able to keep your car. But in the majority of bankruptcy cases we handle, we are successful in helping our clients keep their cars. If that’s what they really want. Sometimes it’s simply not worth it to keep a car and if that’s how you feel, that’s okay because bankruptcy allows you to give the car back and eliminate the debt you owe on it. You don’t have to worry about selling it or trading it in. If you choose to surrender the car, all that becomes the finance company’s problem.

But if you want to keep the car, our attorneys will work all the numbers and negotiate a reaffirmation agreement or redemption in Chapter 7 cases or formulate a Chapter 13 plan that will enable you to keep your car. The bottom line is that we are here to help you get the best outcome for you, whether it’s keeping the car or surrendering it. And in the process, your phone will stop ringing off the hook and the repo man will not show up in the middle of the night to repossess your car. But until you call us, we can’t help you. So, pick up the phone today. Our attorneys are available to help you by answering your questions and, if you choose to file bankruptcy, they will be with you every step of the way.

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