According to The Washington Post; "A record 7 million Americans are 3 months behind on their car payments" - February 2019. That title says it all. In other words, if you are filing bankruptcy and have missed your car payments, but you still want to keep your car, you are not alone.
The Credit Union Journal has a recent article in the May 2019 edition titled; "In avoiding subprime auto loans, are Credit Unions shunning their roots?" It turns out that car loan defaults are once again at historic highs. This is a nationwide problem for lenders, and not just locally here in Ventura County or Los Angeles County.
There are legal remedies you can deploy to stop your car from being repossessed. Many consumers do not realize that under both Chapter 7 and Chapter 13 Bankruptcy Law you can temporarily prevent car repossession by your lender. This is because during bankruptcy proceedings the court issues an "Automatic Stay" prohibiting and preventing the lender from repossessing your car. The lender can ask the court remove the 'automatic stay' and if the court agrees, the lender may take possession of 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 repayment plan.
The best way to deal with this situation is to be in contact with your car lender, and it's best to do that through a bankruptcy attorney, it holds more weight. It also stops the lender from trying to bully you. Your attorney can renegotiate the terms and help you set up a new payment structure thus, allowing you to keep your automobile in a bankruptcy.
Consider if you will that lenders don't really want to repossess cars, they are not in the automotive business, they are in the lending business, they just want to be paid, as per the original agreement. If they realize that isn't going to happen, they will weigh their options and consider what's best for them. Perhaps, a reduced interest rate, reduced balance, or renegotiated terms are better for the lender than a repossessed used car with low resell market value due to wear and tear and depreciation. Face it lenders do not want to lose any more money than they absolutely have to.
Another important point you must remember; the 'automatic bankruptcy stay' is only temporary, and if you haven't been making timely payments, once your case is closed you can expect the lender to demand return of the car or they will repossess it. Also keep in mind that the stay is only good during the bankruptcy proceedings which for Chapter 7 lasts about 3 months or so.
What's the Best Way to Prevent Car Repossession During Bankruptcy Court Proceedings?
- Make the payments
- Make up missed payment
- Come up with a repayment plan, ask court to approve it
- Stay in contact with the lender through your attorney
- Ask for some help perhaps paying interest only for a couple of payments
- Renegotiate the Car Loan
- Ask court if you can buy your car back for its fair market value (Redeeming Your Car under Chapter 7 Bankruptcy Law).
- Ask your bankruptcy attorney about 'cramdown' strategies in Chapter 13 bankruptcy
Ask your bankruptcy attorney to help you come up with a repayment plan so the lender can get the missed payments. If this has happened to you, and if your car has already been repossessed, do not delay. Call your bankruptcy attorney now! That's probably the best advice of all.
Summing it all up!
You need to know your rights and understand the motivations of your lender. You need a good solid bankruptcy lawyer who works for you, one who has dealt with the local lenders here in Ventura and LA County. An attorney who gets it and has decades of experience. With the right strategy, you'll be able to keep your car, prevent humiliation, and prevent loss of your transportation. After all, we live in California and you need a car.