If you have bought a car and are unable to make the monthly payments, the lender could repossess the vehicle. The laws for repossession are different for every state, but the general rule is that the lender is allowed to reclaim the vehicle if the buyer is found guilty of not paying the loan amounts properly.
If the lender ends up reporting the repossession to a credit agency, it could be extremely destructive to the debtor’s credit score. If you are struggling with making payments and need a solution, you can Press The Restart Button by filing for bankruptcy.
How to avoid repossession of your vehicle
- Automatic stay.
Automatic stay happens when you file for bankruptcy before the lender even gets a chance to repossess your car. What happens is that the court prohibits the lenders from their collection activities and temporarily avoids car repossession. However, once your case is closed, the lender can again claim the vehicle. Besides, the lender can file a motion as well as request the removal of the stay.
- Get current on your payments.
When you take a loan, you sign a document that specifies the conditions of the payment. There is also a section that tells you what happens when you fail to make payments. Some loan terms specify that the lender will contact you in writing to alert you about your late payments. If they did not, you could still make the payments you have missed along with any late fees.
- Negotiate new loan tenure or term.
Even though you might not think your lender would agree to a new loan term, there is no harm in trying. Try to negotiate a new loan tenure or term when you get time to avoid repossession. Negotiating the interest rate can help to a great extent.
- Redeeming the car.
If the lender has already repossessed your vehicle, you can still get it back before they sell it off to somebody else. Of course, to do this, you would need to sell everything you owe to the lender. While this may not seem like a realistic option, it helps to know that you still have some time left to redeem your vehicle even after it has been repossessed.
- Buy your car back at the auction.
When you fail to make the car loan payments, and the lender repossesses your car, they arrange an auction to sell it to the highest bidder. Bid for your car and buy it back before anyone else gets it. However, you still have to make the payments.