If you fall behind on the payments for your car, the lender has the right to repossess your vehicle. Worse yet, the lender can also go after you for any loan deficiency, meaning that you’ll be stuck without a vehicle and could be facing an additional debt of hundreds or thousands of dollars.
Laws will vary from state to state, but missing a single car payment does not automatically mean you are in default on your loan. Usually, your loan agreement will tell you when you are in default as part of your loan contract. That’s why it’s important to read your contract thoroughly when you first purchase your car.
If you do go into default, you do have some options that may stave off repossession.
Reinstate the loan. If you can make up all the late payments on the loan, including any fees and late charges, then you have cured the default and have prevented your car from being repossessed. Laws will vary, and your contract may also state whether or not reinstatement is a strategy you can use.
Redeem the car. If your car has been repossessed, and if you are subsequently able to make up the entire balance due on the car loan, you may be able to get your car back. This may be a pricey way to go, especially when storage and repossession fees are tacked on, but if you really want your car back, it is an option for you.
Negotiate with the creditor. You or your attorney may be able to strike a deal with the creditor. If you can offer more than the creditor might get at a public auction, they may be open to talking with you, especially if it will save them storage, advertising and other costs associated with the auction option.
File bankruptcy. When you file either Chapter 7 or Chapter 13 bankruptcy, creditors are stopped from pursuing repossession or collection actions against you, at least on a temporary basis. As your bankruptcy moves forward, you will need to work out some sort of strategy, but the added time may give you the breathing room you need to put yourself in a better financial position.
The Hixson Law Firm serves clients in Mansfield, Arlington, Grand Prairie and other nearby Texas communities.