According to the Washington Post; “A record 7 million Americans are 3 months behind on their car payments” – February 2019. This headline says it all. In other words, if you file for bankruptcy and lose your car payments, but still want to keep your car, you’re not alone.
Credit Union Journal has a recent article in its May 2019 issue titled; “In the context of avoiding subprime auto loans, are credit unions abandoning their roots?” It turns out that auto loan defaults are once again hitting record levels. This is a national problem for lenders, not just local here in Ventura County or Los Angeles County.
There are legal remedies you can use to prevent your car from being recovered. Many consumers don’t realize that under both Chapter 7 and Chapter 13 bankruptcy code, you can temporarily prevent the vehicle from being recovered by the lender. This is because during bankruptcy proceedings, the court issues an “automatic stop” that prohibits and prevents the lender from recovering your car. The lender can ask the court to remove the “automatic stay” and if the court agrees, the lender may seize the car anyway, but this temporary stay may be all you need to get the lender’s attention to work with you and your attorney on a modified payment plan.
The best way to handle this situation is to get in touch with your car lender, and it is best to do this through a bankruptcy attorney, this has more weight. It also prevents the lender from trying to bully you. Your attorney can renegotiate the terms and help you set up a new payment structure, allowing you to keep your vehicle in bankruptcy.
Consider if you want the lenders don’t really want to repossess the cars, they’re not in the auto business, they’re in the lending business, they just want to be paid, as per the original agreement. If they realize that won’t happen, they will weigh their options and think what’s best for them. A reduced interest rate, lower balance, or renegotiated terms may be better for the lender than a repossessed used car at a lower market value for resale due to wear and tear. Faced with it, lenders don’t want to lose any more money than they absolutely have to.
Another important point to remember; An “auto bankruptcy stop” is only temporary, and if you haven’t made your payments in time, once your case is closed, you can expect the lender to ask for the car to be returned or to have it back. Also keep in mind that residency is only good during bankruptcy proceedings which last in Chapter 7 about 3 months or so.
What is the best way to prevent vehicle recovery during bankruptcy court proceedings?
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make payment
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Pay bill compensation
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Make a payment plan, and ask the court to approve it
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Stay in touch with the lender through your attorney
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Ask for some help, maybe pay the interest only for a few payments
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Car loan renegotiation
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Ask the court if you can buy back your car at its fair market value (recovering your car under Chapter 7 Bankruptcy Law).
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Ask a bankruptcy attorney about “spasmodic” strategies in Chapter 13 bankruptcy
What can you do if your car was repossessed before the date of filing for bankruptcy?
Ask a bankruptcy attorney to help you come up with a payment plan so the lender can get back on the missed payments. If this happens to you, and if your car has already been recovered, don’t delay. Contact a bankruptcy attorney now! This is probably the best advice ever.
Summing it all up!
You need to know your rights and understand your lender’s motivations. You need a good strong bankruptcy attorney that works for you, someone who has dealt with local lenders here in Ventura and LA County. An attorney he has acquired with decades of experience. With the right strategy, you will be able to keep your car, prevent humiliation, and prevent losing your transportation. After all, we live in California and you need a car.