If you’ve defaulted on a car loan and are faced with a lawsuit or repossession, you unfortunately don’t have too many.
First, if the lender has a valid lien on your car, and you are in breach of your loan agreement, they can come take your car. They will then sell it at auction and tell you that you owe the difference, plus all the costs of repossessing, storing, and selling it.
It’s a harsh system, but it’s what we’ve got, so what can you do.
First, you could pay the debt. Make arrangements to come current and stick to a payment plan with the creditor. This only works if you have income.
Second, you could let them have the car and file Chapter 7. This gets rid of the debt obligation, but leaves you without a car.
Third, you could attempt a Reorganization bankruptcy (Chapter 13). This could potentially allow you to cram down the car loan, so you only pay what the car is worth. Usually you do this at a lower interest rate as well. Again, this option requires that you have a steady source of income.
What happens if you can’t pay and don’t file Chapter 7.
Usually, the creditor will eventually file a lawsuit against you to recover the balance. If they prove their case in court they will receive a judgment against you. The judgment will allow them to get a garnishment order, and garnish your bank accounts, wages, etc. Judgments can also be enrolled against any real estate you own.
Living life with a judgment hanging over your head is no way to live.
If you are interested in learning more about this and other subjects, click through our News and Articles and read more. If you want our help resolving your issue, please feel free to contact the Grafton Firm.