Can’t Afford Your Car Payments - Is Voluntary Surrender Better Than Repossession and Can Bankruptcy Help?

If you're late on your car loan, the repo man is coming

Image Source: Flickr User Emran Kassim

In most areas of North Carolina, a car is a necessity. You need it to get to work, to take your kids to activities, to run errands, and get to the doctor. Not only is going without a car an inconvenience, but it can be costly to rent a car or take taxis or Uber everywhere. And doing without transportation isn’t an option. That’s why it can be terribly stressful if you fall behind on your car payments. Today we’ll look at some options to consider if your car is in jeopardy because you’re delinquent on payments.

How long before your lender will take your vehicle?

How long you can keep your car when you are behind on payments depends on the policy of your lender. During the recession, some aggressive lenders repossessed vehicles after one missed payment. And if you bought through a buy-here-pay-here lot that requires more than one payment a month, you may be at risk for repossession within a week or two of a missed installment. With a standard auto loan, it can be two to three missed payments before there’s a repo.

Will you get a warning before your car is repossessed?

Generally, you will not get a call saying “we’re coming today to take your vehicle.” However, before a repossession is scheduled, your lender will usually make a number of attempts to contact you and try to get you to schedule a payment or work something out. If you ignore these calls, the lender may assume you can’t make your payment, don’t want to make arrangements, and will push on with the repossession.

What are your options to avoid repossession?

There are a couple of options that can help you avoid repossession – and that may even help you keep your car. Rather than sit by and wait for a repo, you can surrender the vehicle. This means you will lose the car, but it also means you won’t be living in fear of a repo and can control the situation, to some extent. The other options we’ll discuss can help you try and keep your car.

#1 Make a payment arrangement

If you are a payment or two behind due to a situation you don’t expect to be ongoing – like a car accident that kept you out of work for a month or two – you may be able to work something out. For instance, your lender may take those few payments and tack them onto the end of your loan. If you can talk your lender into this, it will likely be a one-shot deal they won’t repeat.

#2 Refinance your loan

If you’re not so behind on all your bills that your credit rating is bad, you may be able to refinance with another lender and get a fresh start. This is more likely to work if the delinquent payments haven’t hit your credit report yet. But if you’re just going to fall behind on that loan too because of an ongoing issue, this may only postpone rather than cure your problem.

#3 File Chapter 13 bankruptcy

Chapter 13 bankruptcy offers you several options to deal with a delinquent car loan. First, all collections activities will stop, and that includes repossession. Second, if your car has recently been repossessed, you may be able to get it back. Third, if your car is worth less than the loan balance you can get a “cramdown” which can lower the balance owed and interest rate.

#4 File Chapter 7 bankruptcy

With Chapter 7 bankruptcy, you cannot get a cramdown on your balance and interest and keep your loan. However, you can get a cramdown to the fair market value of your loan if you can come up with enough cash to pay that amount in a lump sum. If you have resources, such as family you can borrow from or a 401(k) loan you can take, this can work.

If you’ve got too much debt to deal with, there is a better way. Contact the Law Offices of John T. Orcutt today to schedule a North Carolina bankruptcy consultation and discuss the best debt relief alternative for your unique circumstances. Call +1-833-627-0115 now for a free NC bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro or WilmingtonRaleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington.