If you are behind on several car payments, you may fear repossession. Perhaps you wonder what to do next. There are a few options available. One is to contact your lender and request leniency. Another is to try selling your vehicle to pay off the loans or trading it in for a more affordable one.
A path many are reluctant to consider is filing for Chapter 13 bankruptcy. You, like others, may recoil at the idea. There is a stigma associated with this tool, an undeserved one. According to data from the Administrative Office of the U.S. Courts, a total of 682,363 bankruptcies took place in 2020. This is because, far from being shameful, the process is a valuable instrument that grants people fresh starts, does not permanently destroy their credit and is capable of aiding you with your car loan problems.
It stops repossession
Once you file Chapter 13 bankruptcy, an automatic stay starts. This basically halts collection letters, phone calls and other attempts to demand repayment by creditors. It also prevents your lender from taking back your automobile.
It may reduce what you owe
If you meet certain conditions, you may end up with a reduced payment. A “cram down” may lower your financial obligation to the vehicle’s current worth rather than the balance you originally contracted for.
It grants you the chance to catch up
In this type of bankruptcy, you develop a plan through which you pay off your debts in a set period of time. You have the opportunity to not only cover those missed payments but all the others as well, without fear of pressure from loan agents.
Chapter 13 bankruptcy is a reasonable alternative for dealing with overdue car payments. It may help you keep your vehicle and pay it off.