So you’re in over your head with your car payments and you’re trying to decide what to do. By the time you’re done making your payment and dealing with insurance your car is surely one of the biggest bills you have, at least, if you financed a late model vehicle through any modern day finance company.
If you’re already falling behind and know repossession could be in your future you may consider just calling the car company up and telling them to come get it. But is it a good idea?
You may end up moving debt rather than eliminating it.
Here’s what happens during any repossession, voluntary or involuntary.
The repo company takes the car and fixes it up. Then they sell it at auction. Some companies will do a pretty good job of selling it for close to what it’s worth. Others won’t.
They will then charge you the difference between what you owed and what they sold it for. This is called the “deficiency balance.” They can’t demand a monthly payment, but you might end up trying to make a payment arrangement anyway. This is because they can still sue you over this balance.
Worse, if you have any damage on the car the finance company will charge you for it. They’ll go to your insurance company first. If you’re lucky the insurance company will honor the claim, but you’ll still owe the deductible. If you’re unlucky the insurance company will find a way to dump those damages right back in your lap. In some cases you might end up owing exactly as much money as you owed before.
It won’t help your credit.
Credit reporting agencies treat voluntary and involuntary repossessions exactly the same way. They won’t give you any bonus points for giving up the car. Your score will tank either way.
Which means considering this course of action in a last-ditch attempt to save your credit it is relatively futile.
Filing for bankruptcy is often the better option.
With a Chapter 13 bankruptcy you can restructure your car payment into your Chapter 13 plan, making it more affordable and keeping the car. If you choose a Chapter 7 you’ll still lose the car, but you’ll lose the deficiency and damage balances.
Is bankruptcy the right solution for you? Every case is different, but in most cases it will be the most helpful course of action. It will even improve your credit.
Not sure what to do? Contact Simon Haysom, LLC, Attorneys at Law, today. Get a free consultation and learn how bankruptcy can help you succeed.
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