Financing your vehicle is often a practical decision. You may not have the cash resources to buy a vehicle with what’s in your checking account. A vehicle loan can help you afford to buy a vehicle, and you can purchase something in much better condition with the help of financing.
It is a common practice for people to make monthly payments for years to pay off the loan they secured to purchase their motor vehicles. Unfortunately, once you miss a payment or two, you are at risk of your lender potentially repossessing the vehicle.
Bankruptcy can help protect the investment you’ve made in the vehicle so far while also taking control of your other financial obligations.
Bankruptcy will stop collection efforts
Unlike when you fall behind on a mortgage, the lender that financed your vehicle purchase does not have to provide you with a specific written warning before they attempt to repossess your vehicle. The terms of your loan may clarify when repossession efforts might start, or the lender may simply load up your vehicle one night without even informing you that they intended to do so.
When you initially file for bankruptcy, the courts issue an automatic stay that protects you from future collection activity until you resolve your filing. Until you settle your financial issues, you typically won’t have to worry about repossession after you file.
You can negotiate the loan
When you file a Chapter 13 bankruptcy specifically, you put yourself in an excellent position to work with the lender to keep your vehicle while making your loan obligations more manageable. Lenders may agree to reduce your monthly payment and increase how many months you make payments. They may even allow you to catch up on the missed payments currently owed at the end of the loan instead of demanding that you pay those amounts in full now.
Even if you don’t renegotiate your loan and aren’t at immediate risk of losing your vehicle, bankruptcy can help you by freeing up more of your budget every month to meet your secured financial obligations, like your vehicle loan. Filing for personal bankruptcy can be a smart decision for those struggling to make all of their monthly payments on time and worried about losing their vehicles to repossession.