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Bankruptcy Help For Everyday People

How bankruptcy impacts a vehicle loan

On Behalf of | Feb 10, 2021 | Personal Bankruptcy |

It may be possible to retain your vehicle after filing for bankruptcy in North Carolina. In many cases, your lender will ask that you reaffirm the debt, which means that you agree to continue making payments while your case is pending. However, a lender may also allow you to retain ownership of your vehicle without signing any type of formal agreement.

How much equity is in the car?

If you have positive equity in your vehicle, it may be possible to sell it and use the proceeds to pay off the existing loan balance. The equity can then be used to pay other creditors or to help pay expenses related to filing for bankruptcy. If you have negative equity in the car, it may be possible to eliminate it by redeeming the loan. A bankruptcy law attorney may be able to talk more about what it means to redeem a loan and the process of doing so.

You can choose to surrender the vehicle

There is no guarantee that your lender will allow you to reaffirm an existing loan or otherwise renegotiate its terms. In such a scenario, it may be in your best interest to return the vehicle to the lender. In most cases, surrendering the vehicle also means that you’re no longer responsible for future loan payments. Furthermore, any negative equity in the car will likely be forgiven. This means that a bank, credit union or other financial institution can’t take further collection actions against you.

Be sure to keep in touch with your lender

There is a good chance that your lender will stop sending statements after you file for bankruptcy. Therefore, it is a good idea to contact your bank’s customer service department regularly to make sure that your account is still in good standing.

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