Most people cannot afford to buy a vehicle outright when they need transportation. Financing new and used vehicle purchases is standard practice. Even people with questionable credit history can qualify for vehicle financing because the vehicle serves as collateral. Lenders don’t have to worry about taking major losses because the vehicle helps secure the loan.
If the borrower falls behind on their financial obligations, the lender can repossess the financed vehicle. Lenders can act to repossess a vehicle without warning, possibly after just one missed payment. Vehicle repossession can cause significant financial hardship. People may be at risk of losing their jobs and may have a much more difficult time qualifying for financing for a replacement vehicle.
Chapter 13 bankruptcy can potentially help those who have lost their vehicles to repossession. A prompt filing is crucial, as people generally can’t reclaim repossessed vehicles after lenders sell them at auction. How do filers regain their vehicles during a Chapter 13 bankruptcy?
By negotiating a plan
Part of what separates a Chapter 13 bankruptcy from a Chapter 7 bankruptcy is the requirement to establish a repayment plan. In some cases, the process of negotiating the plan can lead to the filer regaining possession of a repossessed motor vehicle.
In a Chapter 13 bankruptcy, secured debts like car loans can be part of the repayment plan. Lenders may agree to return the vehicle in exchange for newly-negotiated payment arrangements. The automatic stay granted when someone files can prevent a pending repossession or halt the sale of a vehicle.
By having the right support
Trying to regain access to a repossessed vehicle is a very challenging process. Most people pursuing a Chapter 13 bankruptcy benefit from having legal representation during that process.
Those in unusual, particularly difficult situations, such as those with a recently repossessed vehicle, may need assistance more than the average filer. An attorney can advise someone on when and how to file. They can also manage communication with creditors, including the lender that may have repossessed a financed vehicle.
Taking immediate action when a vehicle is at risk of repossession or has been repossessed can help filers optimize the benefits they derive from personal bankruptcy. Chapter 13 bankruptcy is one of the best means of addressing missed vehicle loan payments and vehicle repossession. People facing major financial challenges may need help reviewing their options when considering bankruptcy.
