Filing for Bankruptcy to Avoid Vehicle Repossession
Can Bankruptcy Stop the Repossession of a Vehicle?
Depending on what type of vehicle you have, there are several different ways to stop the repossession of your vehicle. Some of these methods involve refinancing your loan, reaffirming your loan, and ensuring that your payments are adequate.
Reaffirming a Vehicle Loan
Generally, auto lenders want borrowers to reaffirm their car loan when they file for bankruptcy. This is to ensure that they refrain from repossessing the car.
However, there are some pitfalls to reaffirming a vehicle loan. For instance, you could end up paying a higher interest rate. In addition, you may not be able to build a positive credit rating after bankruptcy.
Before reaffirming your car loan, make sure you can afford the monthly payments. You will also want to ask the lender to lower your interest rate. You can even reduce your principal balance. This will reduce your late fees and will make your loan more affordable.
Some states prohibit repossession based on a bankruptcy filing. However, it is not always clear what a debtor can do if their car is repossessed. In some cases, a judge may provide a middle course.
One advantage to reaffirming a car loan after bankruptcy is that you can continue to make your payments on time. This is because the lender will not report your post-bankruptcy payment history to the credit reporting agencies. This could help you build a positive credit rating.
However, you may be liable for the difference between the auction value of the car and the loan balance. You also may be responsible for the deficiency judgment.
Adequate Protection Payments
Having adequate protection payments in bankruptcy can help stop the repossession of your car. Adequate protection payments are payments made during bankruptcy to protect a creditor's depreciating collateral. Generally, adequate protection payments are about 1% to 1.5% of the value of the collateral.
During a chapter 13 bankruptcy, a creditor holds a right to adequate protection, which is an amount of money corresponding to the depreciation of the collateral during the bankruptcy period. It may also include the appropriate insurance coverage for the vehicle.
A creditor may also request periodic payments or additional liens, depending on the circumstances. In addition to protecting the debtor's collateral, adequate protection payments in bankruptcy also give the court a chance to review the debtor's repayment plan.
The amount of adequate protection payments in a bankruptcy depends on the amount of the loan, the value of the collateral, and the type of plan. A typical repayment plan will include between $400 and $500 per month. This is not a lot of money for most people, but it is enough to protect a car loan from repossession.
Generally, adequate protection payments in bankruptcy are required before the court can confirm a bankruptcy plan. Often, this is a statutory requirement. Despite this, each bankruptcy court handles adequate protection payments differently.
Refinancing a Vehicle Loan
Consider refinancing your vehicle if you have been bankrupt or simply struggling to make your auto loan payments. This can be a good way to lower your monthly payments and even get a better interest rate.
The best way to ensure you are getting the most out of your refinancing is to shop around. Some local banks and credit unions have more flexible lending requirements than others. Having a co-signer can also help you qualify for a better rate.
Your credit history is also a factor in the decision to refinance your car. If you have been a good credit risk in the past, you can get a better interest rate and lower your monthly payments. However, if your credit is less than stellar, you may have difficulty finding a lender willing to give you a better rate.
The first step in refinancing a car is to shop around for the best deal. You can do this online. Lenders often have a "lending marketplace" where you can compare offers.
Bankruptcy Attorney Free Consultation
If you have any questions or in need a Bankruptcy Attorney, we have the Best Attorneys in Utah. Please call this law firm for free consultation.
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West Jordan UT 84088
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https://www.ascentlawfirm.comDisclaimer: This is not legal advice and is simply an answer to a question and that if legal advice is sought to contact a licensed attorney in the appropriate jurisdiction.
