Americans shouldered about $1.36 trillion in automobile loan debt in 2020, with an estimated average balance of $19,646, ranking automobile debt as the third largest debt category.1 Home mortgages and student loans are ranked as first and second, respectively. While some lenders have been lenient during the pandemic, borrowers still suffering from financial issues caused by layoffs, medical debt and other financial burdens may find it difficult to pay their automobile loan obligations. Knowing the general facts about automobile repossession can help alleviate an already stressful situation.
If you are facing repossession, there are debt relief options such as personal bankruptcy that can help.
Automobile loans are secured debt loans. That means that the lender, whether it’s a bank, credit union, car dealer or other type of lender, can take back the automobile if you don’t pay your loan on time and then sell the automobile, using the proceeds from the sale to pay back the debt.2 The first step to take when you realize you can’t pay your monthly automobile loan payment is to contact your lender to discuss options available to you.
This might include them waiving the monthly payment and adding it to the end of your loan period. They may also agree to a reduced payment amount or refinancing of your loan at a lower interest rate. If you agree to modifications to your original loan, get the new terms in writing. You also have the option to sell your automobile to pay off the loan prior to not making the monthly loan payment. If you lease a vehicle, however, read your lease document carefully as you may be charged fees for early lease termination.
Technically, a lender has the right to repossess your automobile the day after a missed payment. This rarely occurs, but the time-frame when an automobile is repossessed can vary greatly. Usually, it is several months after you are sent the first past due notice. In some states, a lender is not legally obligated to take you to court, or to even notify you when they intend to repossess your automobile.3 However, the lender or their agent must not “breach the peace” when taking your vehicle.
This means that the repossessor must remove the vehicle without disturbance. The repossessor can’t threaten you, be rude or trick you into providing access to your automobile. The repossessor also can’t enter a structure where you keep your car, even if it is unlocked. Once a vehicle is repossessed, you have 15 days to get it back from the lender, but unfortunately, one of the only ways to do so is to pay the entire loan, plus any costs assessed for repossessing the vehicle. You can also buy your car back when the lender goes to sell it, as most states require that you be notified when and where the automobile will be sold.
Before it gets to this point, know that you have options and speaking with a bankruptcy attorney can help.
Trying to hide your automobile is not a good idea as in some states this would constitute fraud — a criminal act — if you did so to keep your car from being repossessed. The longer it takes the repossessor to locate your vehicle the more they will charge the lender and that cost will be legally passed on to you. The repossessor may also contact your friends, neighbors and relatives to determine if they know where the vehicle is being kept, which is generally embarrassing to the debtor.
Rather than worrying about looking out your window to find your car gone one day, the alternative is to do a voluntarily repossession. In a voluntary repossession you make an arrangement with the lender to give the automobile back to the lender. The car will be sold and you will still be responsible for any balance due the lender if the car is sold for less than you owe on your loan.
An advantage of voluntary repossession is that you will not owe vehicle removal and impound fees that are assessed when an automobile is repossessed. You are also able to control when the vehicle is surrendered so it won’t be an unpleasant surprise when you leave work or your home to find that you no longer have a vehicle. You are also able to get all your possessions out of the vehicle, whereas often possessions (like tools and compact discs) go missing when a vehicle is repossessed.
There is no difference between a voluntary repossession and a regular repossession in terms of your credit. When you miss a payment or payments it shows up on your credit report and repossession will be noted on your credit history for up to seven years.4
Bankruptcy Can Help
If you owe on more than your automobile loan, filing for bankruptcy can be an option. Once you file, a lender can’t sell your automobile without a court order.5 The advice provided is general in nature and may change based on state-specific laws and regulations governing automobile repossessions and bankruptcy. It is best to consult with an attorney who can guide you through the repossession and/or bankruptcy process, making sure that you know your options and that your rights are not being violated.
Don’t let your overwhelming debt ruin your life. A personal bankruptcy attorney can help you keep your car and home as well as eliminate debt so that you can gain control of your finances and move forward. Hines Law is a leading Massachusetts personal bankruptcy law firm that specializes in Chapter 7 and Chapter 13 filings and has been helping clients throughout the greater Boston area for more than 20 years.
Contact us now for your FREE Consultation!
1 American Debt: Auto Loan Balances Hit $1.36 Trillion in 2020 by Amy Fontinelle, 2/11/2021
Link: https://www.investopedia.com/personal-finance/american-debt-auto-loan-debt/
2 Secured Debt by James Chen, 6/13/2020
Link: https://www.investopedia.com/terms/s/secureddebt.asp
3 Car Repossession Laws in Michigan by Beverly Bird
Link: https://www.sapling.com/6804717/car-repossession-laws-michigan
4 What Happens to My Credit Report if I am Late Making Payments on My Auto Loan or My Car is Repossessed? 8/18/2015
Link: https://www.consumerfinance.gov/ask-cfpb/what-happens-to-my-credit-report-if-i-am-late-making-payments-on-my-auto-loan-or-my-car-is-repossessed-en-853/
5 Car Repossession Laws: An Overview by Baran Bulkat
Link: https://www.nolo.com/legal-encyclopedia/car-repossession-laws-overview.html
The post Automobile Repossession and How Personal Bankruptcy Can Help appeared first on Bankruptcy Lawyers Serving Framingham, MA and Beyond.
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