Automobile Loans and Chapter 7

Automobile Loans and Chapter 7

November 3, 2022

The common question is “Will I lose my car?” It is certainly a  reasonable concern. This guide goes over the three (3) legal options  plus two (2) alternatives.

Essentially,  you agree that the debt goes on after the bankruptcy with the same  contract terms. The finance company retains its lien, and you will be  personally liable for the debt.The main  requirement is that you are current or close to current on your  payments. Generally, the finance company wants proof of Physical Damage  Insurance.Remember, the finance company wants your money not your car.There  is a disadvantage to reaffirming a debt. If, after the Bankruptcy is  over, you fall behind on the payment the finance company can repossess  the car and hold you liable for any deficiency. This is the same as  before a bankruptcy. Similarly, if you have an accident, the insurance  company pays the value of the car and you are liable for the rest.

Some  folks decide the car is not worth keeping and paying for it. This is a  great option if you come to that decision. Most cars are worth much less  than the balance owed on the loan. You will get a discharge of the  debt: you owe nothing.

If  your car is worth less than what’s owed, you can save money by paying  the retail value of the car and discharging the rest of the debt. Assume  you owe $17,000 and the car is only worth $8,000, you can redeem by  paying $8,000.

You  usually have just a month or two to come up with the $8,000 so  redemption by itself is often not a realistic option. There are a few  companies that finance the redemption. This allows you to come out of  bankruptcy with lower payments. Will you qualify? That is up to the  redemption financing companies. But there is no harm in applying to  them.

How does one come up with the money to redeem a car?We often refer our clients to a company that finances the redemption.Although acceptance is up to them they advise that are three (3) requirements.

1. No more than 2 repossessions shown on your credit report.No more than 2 bankruptcies in recent years.The vehicle has under 150,000 miles and is less than 10 years old

As an alternative to redemption and if you qualify this company can provide you with a replacement and more affordable car.You can apply over the phone for Complimentary legal advice, and find out if you qualify right away.The lawyers at Robert J Adams & Associates will take care of the rest.