Do you need to stop repossession of your vehicle? If you are behind on your car payments then you are in danger of having your vehicle repossessed. Creditors don’t have to give you notice of repossession. They can take your vehicle while you are at work, at the store, or while you sleep. Once your car is taken it will be sold at auction. The proceeds of the sale are applied to the car loan. If there is any amount still owed on the note then you will still be liable for payment of the remaining amount. Vehicles sold at auction are rarely sold at their fair market value, so there is a very good chance that after the vehicle is sold the borrower will still owe money.
File Chapter 13 Bankruptcy To Stop Repossession
If you are behind on your car payments then Chapter 13 bankruptcy can help you in two ways. First, filing bankruptcy causes an automatic stay to go into effect. The stay prevents creditors from attempting to collect debt, including repossessing vehicles. As long as the debtor complies with the terms of their bankruptcy case and keeps the vehicle insured then the stay will prevent the lender from taking the vehicle.
Second, debtors in Chapter 13 bankruptcy can pay their car loan as part of their Chapter 13 plan. They no longer make payments to the creditor directly. All payments are made to a trustee who pays the creditor as provided for in the plan. Car loans paid through the plan can sometimes be crammed down. For example, Chapter 13 debtors may be able to lower the interest rate on the loan, reduce the claim amount, and increase the amount of time allowed for repayment in order to reduce the monthly payment.
After Completion Of The Plan
Once the debtor completes the Chapter 13 plan, the lender must hand over title to the vehicle. In many cases the debtor has paid much less than would have been required under the original contract. However, the creditor is bound by the terms of the plan. The remaining amount owed under the original contract is discharged. This means that the creditor cannot collect any further amounts from the debtor.