Personal transportation is essential for most modern adults. They need a vehicle to get to and from work and to take care of their families. Without a vehicle, people become dependent either on public transportation or cost-prohibitive rideshare services.
Unfortunately, vehicle prices have increased noticeably in recent years, making financing a vehicle purchase necessary for many people. Their vehicles are then at risk of repossession if they fall behind on their payments.
Vehicle repossession can leave someone without a necessary resource and may make acquiring a new vehicle difficult. A prompt bankruptcy filing when repossession is a serious concern can make a major difference for someone who needs to retain their financed vehicle.
Repossession rules favor the lender
Consumer protection laws do not extend many protections to individuals with finance vehicles, especially when compared with the protections related to mortgages. Lenders do not have to provide them with advanced notice of repossession attempts. It can be very difficult for consumers to avoid repossession once a lender decides to reclaim the collateral vehicle due to someone’s default on a loan.
Provided that the lender has not physically taken the vehicle yet, the borrower who missed payments might benefit from a bankruptcy filing. When someone files for bankruptcy, the courts issue an automatic stay. Creditors and lenders have to halt collection activity at least temporarily until the courts resolve the bankruptcy filing one way or the other.
Borrowers who file for bankruptcy can potentially renegotiate certain aspects of their loan with the lender, such as moving the missed payment(s) to the end of the repayment period. They could also increase the duration of the loan as a way of reducing monthly payments. While bankruptcy doesn’t allow a filer to discharge their vehicle loan and keep the vehicle, they can eliminate other debts and possibly change the terms of their vehicle loan.
The sooner the owner of the vehicle who missed a payment takes action, the better their chances of avoiding repossession and resolving their financial difficulties. Bankruptcy doesn’t just halt vehicle repossession but can also help borrowers repair their credit by reducing some of their financial obligations. Taking appropriate action to avoid aggressive collection efforts can be beneficial for those experiencing temporary financial hardship.
