Financing the purchase of a vehicle is sometimes necessary if you don’t have the liquid capital to make such a big purchase. Other times, the financing terms can be attractive enough to justify leaving money in savings while buying your vehicle on credit.
Unfortunately, when you don’t own your vehicle outright, the lender could potentially take it back from you. Until you’ve paid the loan back in full, the vehicle remains vulnerable as the collateral for the loan. Chances are good that your loan paperwork included details about the company’s repossession policies.
Some lenders wait multiple months to give you a chance to catch up on missed payments. Others might initiate repossession proceedings quickly. Knowing the policy of the company that financed your purchase is important. Otherwise, if you fall behind, you may not know when repossession is imminent.
The law does not require that lenders alert owners about future repossession
When a mortgage company intends to foreclose on a home, they must alert the property owner before they start that process. The same is not true of vehicle repossession.
Your lender does have an obligation to affirm that they have taken possession of the vehicle after they repossess it by sending you a letter. They also need to notify you about the sale of a repossessed vehicle.
They do not have to warn you ahead of time that they will soon send a specialized tow truck out to tow your vehicle away. Some companies intentionally avoid warning owners about repossession attempts. Knowing ahead of time leads people to do questionable things, like hiding the vehicle or even assaulting the person trying to repossess it.
Filing bankruptcy could stop the possession before it occurs
If you have fallen behind on your financial responsibilities, filing for bankruptcy could mean a discharge that helps balance your future budget.
Before your discharge, you will also have an automatic stay on collection activity. Companies will have to temporarily halt their efforts to collect on debts possibly involved in the bankruptcy. The automatic stay could prevent a lender from moving forward with repossession efforts. You may also be in a position to renegotiate your debt with the lender during your bankruptcy.
Understanding how filing personal bankruptcy may impact repossession could help you take timely action to protect your vehicle.