According to The Washington Post; “A record 7 million Americans are 3 months behind on their car payments,” February 2019. That title says it all. In other words, if you file for bankruptcy and haven’t paid your car payments, but you still want to keep your car, you are not alone.
The Credit Union Journal has a recent article in the May 2019 issue titled; “By avoiding subprime auto loans, are credit unions shirking their roots? It turns out that auto loan defaults are once again at all-time highs. This is a nationwide problem for lenders, and not only locally here in Ventura County or Los Angeles County.
There are legal remedies that you can implement to prevent your car from being repossessed. Many consumers do not realize that under Chapter 7 and Chapter 13 of the Bankruptcy Law you can temporarily avoid recovery by your lender. This is because during bankruptcy proceedings the court issues an “Automatic Stay” that prohibits and prevents the lender from repossessing your car. The lender can ask the court to remove the ‘automatic stay’ and if the court agrees, the lender can take possession of the car anyway, but this temporary stay may be all it takes to get the lender’s attention to work. with you and your attorney on a modified payment plan.
The best way to deal with this situation is to be in contact with your car lender, and it is better to do it through a bankruptcy attorney, it carries more weight. It also prevents the lender from trying to intimidate you. Your attorney can renegotiate the terms and help you establish a new payment structure, which will allow you to keep your car in bankruptcy.
Consider if you want the lenders to actually not want to repossess the cars, they are not in the auto business, they are in the loan business, they just want to get paid, per the original agreement. If they realize that this will not happen, they will weigh their options and consider what is best for them. Perhaps a reduced interest rate, reduced balance, or renegotiated terms are better for the lender than a salvaged used car with a low resale market value due to wear and tear and depreciation. Face it, lenders don’t want to lose more money than is absolutely necessary.
Another important point that you must remember; The ‘automatic stay of bankruptcy’ is only temporary, and if you haven’t made payments on time, once your case is closed, you can expect the lender to demand the return of the car or to get it back. Also note that the suspension is only valid during the bankruptcy process, which for Chapter 7 lasts about 3 months.
What is the best way to prevent a car repossession during bankruptcy proceedings?
Get back your late payment
Make a payment plan, ask the court to approve it
Stay in touch with the lender through your attorney.
Ask for help maybe paying interest for just a couple of payments
Renegotiate the car loan
Ask the court if you can buy your car back for its fair market value (Trade in your car under Chapter 7 of the Bankruptcy Law).
Ask Your Bankruptcy Attorney About Chapter 13 “ Reduction ” Strategies
What can you do if your car is repossessed before your bankruptcy date?
Ask your bankruptcy attorney to help you develop a payment plan so that the lender can receive late payments. If this has happened to you, and your car has already been repossessed, don’t delay. Call Your Bankruptcy Attorney Now! That is probably the best advice of all.
Summing everything up!
You need to know your rights and understand your lender’s motivations. You need a good solid bankruptcy attorney to work for you, one who has dealt with the local lenders here in Ventura and Los Angeles County. An attorney who succeeds and has decades of experience. With the right strategy, you can keep your car, avoid humiliation, and avoid losing your transportation. After all, we live in California and you need a car.