Do you need help keeping your car?
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Drowning in debt is a tough situation for Wilmington consumers. One source of debt stress can be a car loan you’re struggling to afford. You need your vehicle to get to work, get the kids to school, and take care of personal matters. Car loans are on the rise and so are delinquencies on car loans.
If you fall behind on your car payments, your lender can repossess your vehicle, and you can find yourself without a ride. But if you choose Chapter 7 bankruptcy to deal with your debt dilemma, you can take advantage of an option called redemption to keep your car at a much lower cost.
Car Loans and Defaults Are one the Rise
Data from the Federal Reserve shows that 2016 brought more car loans than ever before. Auto debt had spiked to nearly $1.2 trillion by the end of last year representing an increase of almost 10%. The Fed also found that car loan prices have gone up and so have car loan balances.
In contrast, wages have not risen nearly as steeply. Also troubling is the fact that almost one-fourth of auto loans are subprime, which means they come with high-interest rates. Delinquent car loan balances have risen to more than $25 billion across the U.S.
Are You Late on Your Wilmington Car Loan?
Roughly six million consumers are 90 days or more behind on their car loan payments, so if you’ve fallen behind on this debt, you’re not alone. If you are late on your car payments, you might be able to sell the vehicle to get out from under the loan and find more affordable transportation.
But if you’re upside down on your car loan (owe more than the vehicle is worth), selling might be impossible. Plus, once you fall behind on your payments, your auto lender will pursue collection options up to and including repossession. But Chapter 7 bankruptcy can stop that and offer options.
What Is Redemption?
If you file Wilmington Chapter 7 bankruptcy, if you qualify, you can choose between redemption or reaffirmation for your car loan. Reaffirmation won’t reduce your car payments or get you a better deal. It’s simply you signing an agreement that you’ll keep on with the car loan. It’s not helpful in most cases.
Redemption is a much better deal. You can pay the fair market value of the vehicle and be done with the loan. Redemption can save you thousands of dollars, but it must be paid in a lump sum. You must either have cash on hand to pay the redemption or be able to get the funds from somewhere to use this option.
How Can You Come Up with Redemption Money?
For those pursuing Chapter 7 bankruptcy, there’s usually not a lot of spare cash lying around. However, taking advantage of the redemption option in your Wilmington bankruptcy can keep you on the road driving for much less than buying a replacement vehicle. Here are some ideas to consider.
If you have a 401(k), you may be able to borrow against it. The process is fast, you pay it back from payroll, and no interest is charged. You can ask family or friends to help out, ask your employer for a payroll advance, or sell some of your stuff. Alternately, you might be able to obtain a redemption loan.
You May Redeem Even After Repossession
If your vehicle was recently repossessed, you have a short window of time to redeem your loan. If your vehicle loan is upside down and you’re behind on your payments, but you have not been repossessed yet, you can redeem before it gets to the repossession stage.
To find out more about the benefits of Chapter 7 bankruptcy, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now for a free Wilmington bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.