Many people hit a financial roadblock occasionally where the struggle to meet their bills. This can be especially true if you have a vehicle payment. Not only do you have the vehicle loan to pay for, you also have to carry expensive vehicle liability insurance. This is on top of all the other expenses you may have, rent or mortgage, utilities, food, clothing, daycare. . . the list goes on and on. None of these are optional expenses. You need your vehicle to get back and forth to work to earn money to pay your bills.
It can feel like a vicious cycle, especially if you fall behind on your vehicle payment. All it takes is to get behind one or two payments and the bank or loan company will likely threaten you with repossession of the vehicle if you don’t hurry up and get caught up.
What’s even more frustrating is that you probably owe more for your vehicle than what it is worth. Vehicles are notorious for depreciating in value as you drive them out of the dealership parking lot. So, if your vehicle is repossessed and the auctioned off, you will probably still owe thousands of dollars on the loan even after the auction sale price is deducted from your total balance owed. In addition, the bank will add on the cost of the repossession, the interest, and late charges to that total. Therefore, surrendering your vehicle is the last thing you should do.
Filing for Bankruptcy
Filing for bankruptcy can help you keep your vehicle. Your bankruptcy attorney will help you determine which type of bankruptcy will be your best option.
Chapter 7 bankruptcy will help get rid of most of your other debt and this could allow you to be able to afford the current vehicle payment. Your other option with Chapter 7 is to surrender the vehicle and whatever the deficiency balance is after it is auctioned off can be included in your bankruptcy and charged off.
But Chapter 7 bankruptcy is the least desirable choice to save your vehicle. Chapter 13 bankruptcy gives you more options that our clients find more favorable then Chapter 7.
Chapter 7 does not allow you to change the vehicle loan terms. Chapter 13 does if you owe more on the vehicle than what its worth is. Your bankruptcy attorney can negotiate a cramdown deal with the bank or loan company. This will make your monthly payment lower, as well as lessen the total amount you owe. And it does not require you to catch up with your current arrears in order to cramdown your current loan.
If you are facing vehicle repossession, contact a chapter 13 bankruptcy lawyer Clearwater, FL residents turn to and find out how we can help.
Thank you to our friends and contributors at The Law Office of Michael A. Ziegler, P.L. for their insight into bankruptcy options.