Submitted by Rachel R on Wed, 02/01/2017 - 9:31am
Losing your car? Bankruptcy may help
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Living with debt you can’t afford can feel like a nightmare. Repossession and foreclosure are powerful tools creditors can use against you if you fall behind on debt payments. It’s a terrible feeling to wake and see your vehicle isn’t in your driveway because of repossession. How will you get to work? How will you get your kids to school and activities? Bankruptcy might help get your car back. Here’s what you need to know.
Is Notice Required Before Repossession?
It's a misconception that you must be notified first. Your lender may threaten repossession or might not. In the small print of your loan agreement, you’ll see terms and conditions that allow your lender to confiscate your vehicle if you don’t stick to the credit arrangement. They don’t have to call or write to let you know they will take your car. They can take it if you fall behind on payments.
What Happens After Repossession?
By law, the agency that repossessed your vehicle (usually hired by your lender) must give you notice within 48 hours that they seized your vehicle. The letter will include information on the agency that repossessed your car and contact information for agency and lender. Included with that notice will be a list of your personal items that were in the vehicle when they took it.
You may be charged for storage on your items, so it’s wise to pick them up ASAP. The next communication you should receive after a repossession is a notice of intent to sell your car from the lender. It can take up to 60 days, but most lenders send out notices much faster. You must have at least 15 days’ notice between when the letter arrives and when they sell your vehicle.
Can You Get Your Vehicle Back Without Filing Bankruptcy?
In the letter of intent to sell, your lender offers options to get your car back. There are two options available through your lender. The first is redemption. When you “redeem” your loan, you pay it off in a lump sum. The challenge with redemption is they usually tack on fees to cover the cost of repossessing and storing your car.
The second option is to “reinstate” the existing loan by catching up past due payments plus repo costs. Reinstating may be more affordable than redemption. You might be able to borrow enough to catch up on the payments and get your vehicle back. However, bankruptcy might be the most affordable way to recover your car.
How Can Bankruptcy Help Get Back a Repossessed Vehicle?
Either Chapter 7 or Chapter 13 North Carolina bankruptcy can help reverse a repossession, but they work quite differently. With Chapter 7, you can stop or reverse a repo and gain 90 days during the automatic stay bankruptcy offers. Redemption through Chapter 7 is cheaper than a straight redemption from your lender outside of bankruptcy.
You would only have to pay off the fair market value of your auto. If you owe more than the car is worth, this can be advantageous. With Chapter 13 bankruptcy, you may be able to get a “cram down” on your loan if you purchased the car more than 910 days (two and a half years) before filing bankruptcy.
A cram down lowers the loan balance to the fair market value of the vehicle and, if you’re paying a high interest rate, lowers it down to a reasonable market rate. Cram downs can make loans more affordable, your car payments more reasonable and can end the repossession threat you're facing.
If you’re facing repossession of your vehicle or your car was already repossessed, the time to act is now. Contact the Law Office of John T. Orcutt to find out more about how bankruptcy can help. Call +1-833-627-0115 now for a free North Carolina bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.
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