The overall cost for a motor vehicle, even a used vehicle, has increased significantly in the last few years. It is more expensive than ever to purchase a new or used vehicle, and many people do not have the cash on hand necessary to purchase even a used vehicle outright. Instead, they require financing for the transaction.
Vehicle loans often offer affordable interest rates and allow people to purchase safer, more valuable vehicles than they could afford with what they have in their savings accounts. However, the danger of financing the vehicle is the machine you depend on for daily transportation is the collateral property for a loan. If you fall behind on the loan, the lender can seek to claim the vehicle via repossession. Missing even a single payment could put your vehicle ownership at risk.
Repossession rules are different than foreclosure rules
Having a vehicle is a necessity for most individuals. Given how crucial your vehicle is to your household’s stability, you might assume that you have protection if you fall behind on a loan attached to the vehicle. You may expect certain protections that don’t actually apply to vehicle loans.
For example, when you miss a mortgage payment, the lender has to warn you of the risk of foreclosure and give you an opportunity to redeem the property. Given that people can move and hide motor vehicles when facing repossession, many lenders do not provide advance warning before initiating repossession for missed payments.
You could wake up one morning and go outside, only to find that your vehicle has disappeared from your driveway.
How bankruptcy helps
Rather than waiting until you’ve already lost valuable property or are subject to judgments in favor of creditors, you can take action to protect yourself and your property when you start falling behind on your accounts.
Reviewing your vehicle loan paperwork and acting to protect yourself after a missed payment could help you avoid aggressive collection efforts like repossession. Lenders have to stop collection activity when you file for bankruptcy, and you may be able to renegotiate the debt at least partially in your bankruptcy proceedings. In Chapter 13 you can often reduce the interest rate and also reduce the principal balance if it exceeds the value of the vehicle. Contact a bankruptcy attorney to discuss your options.