These days it can be a struggle to maintain pace with bills, often to the point of defaulting on an auto loan. Unfortunately, financial institutions usually don’t care about your circumstances - they want your money. If you’re unable to make payment, it may not be long before they send a repo man to knock on your door.
It’s widely believed that unless you are not behind on payments for two consecutive months, you are in a safety zone. The truth is, even a single day delay in payment is enough for bill collectors and repo-men to drive away with your car. But before we understand how you can avoid the repossession of your vehicle, lets first understand how bill collectors and repo-men function.
Understanding Collectors
In order to be a successful bill collector, you’ve got to collect. And those that are most successful in their trade often do so by persuading or threatening debtors. For every cent they collect from the debtor, they receive a commission in proportion to it. This might explain why a repo-man does not show up until you have missed two or three consecutive payments; even knowing you’re in a tight financial spot, they want to leech as much out of you as possible before taking and selling your car. But even then, not only are they selling your car, but they tack on all sorts of repossession, cleaning and legal fees in addition to the remaining balance - which they’re sure to come after you for.
Maximizing Profit
Have you ever wondered what happens to your car after it is repossessed? The lender wants to recover the debt, so the bill collector is given the responsibility of collecting it and the only way to achieve that is by selling your car. Some lenders in the past even managed to make significant profit by selling the repossessed car many times over. If an investigative story aired on the ABC News show 20/20 is to be believed, repo-men who work hand-in-glove with car dealers managed to make about $27,000 on a $5,000 car! Not all lenders are bad, many work with the debtors to work out a solution to allow you to keep your vehicle, but people are driven by incentives, and in the business of debt collections, they want your money.
Know Your Rights
If you absolutely want to keep the vehicle, you can most likely protect it in bankruptcy. In Chapter 7 you can “reaffirm” on a vehicle (and other assets) by using the exemptions provided in the bankruptcy code. However, in Chapter 7 you generally must be current on the payments to reaffirm on the loan (and keep the vehicle). If you’re unable to catch up on your payments, you can maintain the vehicle in a Chapter 13 using a payment plan to catch up on delinquent payments.
In some cases, our clients don’t want to keep the vehicle. It has become a burden, is under market value or is simply not needed. In this case, you can voluntarily surrender the vehicle through bankruptcy, which can completely wipe away the remaining balance in addition to fees and interest. It’s important to remember, a voluntary surrender outside of bankruptcy is almost the same as a repossession - you will still owe the lender the remaining balance in addition to fees and interest.
Make The Best Of Your Situation
At Lincoln Law, helping our clients become debt-free and deal with their assets is what we do. In a Chapter 7, you may owe nothing to anyone. With a Chapter 13, you could have a small monthly payment to get you back on track, and drastically reduce your total amount of debt. Either way, you could free up a lot of space in your monthly budget to deal with the things that matter most.
With financial struggles it’s best to take action quickly - before the problem compounds. In a matter of weeks or even days, debtors can go from a single missed payment, to taking the bus to a new job and wondering what happened. The moment you know you’re in financial trouble, contact us to learn about your options. Even if bankruptcy isn’t the best solution for you, we can arm you with the knowledge you’ll need to confidently deal with the situation. To know how we can help you, call Lincoln Law at 800-404-0018.