Financing a vehicle purchase is a common practice. Most Americans don’t have enough in their savings accounts to simply buy a new vehicle after a car accident or when their older vehicle develops mechanical issues.
Many people trade in their existing vehicle and finance the purchase of their next vehicle. Accessible financing means you won’t have to go without a vehicle or buy something cheap and unreliable. It also means that your vehicle ownership is contingent on continuing to pay the loan.
If you have missed payments, the lender could take steps to repossess it as collateral for the loan. Timely effort to protect yourself can make all the difference for those who must retain their vehicle despite current financial hardship.
Your lender doesn’t have to warn you about a possible repossession
People frequently confuse the rules about foreclosure on someone’s residence with the rules about repossessing a vehicle. Mortgage lenders have to notify homeowners about their intent to foreclose and give the borrower an opportunity to make up their missed payments.
An automotive lender typically does not have to notify the borrower about their intent to repossess the vehicle. Some companies will let you know out of courtesy, but others will repossess the vehicle first and discuss the matter with you later. They take this aggressive approach to stop people from hiding the vehicles to thwart repossession efforts.
Looking over your financing paperwork can help you understand the risks. Some companies may include terms in their loans that allow them to repossess the collateral property after a single missed payment. Knowing your lender’s policy on repossession can help you understand when you need to take drastic steps to avoid the loss of your vehicle and the money you have already invested in repaying your loan.
Bankruptcy can prevent your lender from repossessing the vehicle
Trying to fight back after a lender repossesses your vehicle may be harder than you think. Sometimes, borrowers will have no rights whatsoever and will lose the vehicle and all of the accumulated equity from the payments they made.
Avoiding repossession is a safer option for those with a financed vehicle. When you file for bankruptcy, your creditors can no longer engage in collection activity until the courts rule on your bankruptcy filing or on special requests from individual creditors.
Although filing for bankruptcy will not reverse the repossession of your vehicle, it can stop it, even if the lender has already hired a contractor to locate and haul away your car. Avoiding repossession will put you in a better position to negotiate with your lender and to maximize the benefits of filing for personal bankruptcy.