The threat of a vehicle repossession is a common motivator for a consumer to seek bankruptcy relief, as a Chapter 13 bankruptcy will prevent the repossession and allow the consumer to repay the vehicle loan over time through a court-supervised payment plan. The Chapter 13 bankruptcy may also allow for the debt on the vehicle to be reduced or modified, depending upon the age of the vehicle and when it was acquired. In this way, the loan becomes more affordable for the borrower, especially on vehicles that are upside down or loans with high interest rates. But before it gets to that point, there are a few things to keep in mind regarding the repossession:
– The events that will lead to the repossession of the vehicle are set forth in the loan documents. While these contracts are fairly universal, the events and time periods regarding loan defaults may vary from contract to contract. So be familiar with the pertinent dates that will put the loan into default. (i.e. 30 days late, 60 days late).
– You can still be in default on a car loan even if the payments are current, such as by allowing your insurance to lapse or be cancelled. Or by failing to renew your tag by the due date. Anything that could jeopardize your ability to keep or operate the car can be considered a default under the loan agreement, allowing the lender to repossess the vehicle.
– Unlike a foreclosure, there is not a set legal process that an auto lender must undergo to repossess a vehicle. While many lenders will send default letters and make phone calls on overdue loans, they may not be required by the contract to undertake these efforts in order to repossess a vehicle.
– The lender does not have to notify you when they are going to pick up the vehicle. In most cases, the lender will hire an independent contractor who will retrieve the vehicle at a time when they are going to encounter the least resistance, for instance, while you are asleep or at work.
– Once the vehicle is repossessed, you have the right to recover any personal belongings. Unfortunately, the vehicle may have been towed over 100 miles away. In addition, owners of repossessed vehicles frequently complain of missing or damaged items.
– State law does give you the right to “redeem” the vehicle before it is sold at auction. This means that the borrower can pay off the loan in full and recover the vehicle. However, the time period to redeem the vehicle is very short, usually 10 days.
So what should you do if you are struggling to maintain your vehicle payments? Contacting a bankruptcy attorney before the vehicle is picked up is a very good idea. While a timely Chapter 13 filing can compel a lender to turn over the car, it does not require them to deliver it to you. As a result, you may have to make a long drive to pick up a car that has been damaged during the repossession. It will be helpful to the bankruptcy attorney if you have the following information regarding the automobile loan available at your consultation:
– The make, model and year of the car, with the mileage;
– The purchase agreement and loan documents;
– Proof of full coverage insurance with the auto lender named as the “loss payee”;
– A recent loan statement with the balance and amount of the delinquency.
Don’t wait until it’s too late, especially when so many bankruptcy attorneys offer a free consultation. It may prevent a huge headache when your car is repossessed at the most inopportune time, making recovery difficult.