If you’ve been feeling the squeeze from your monthly car payment lately, you’re not alone. According to this recent article from the Wall Street Journal, millions of borrowers across the United States are falling behind on their auto loans, and subprime borrowers, those with lower credit scores, are facing unprecedented challenges. In 2025, the landscape of auto lending looks harsher than ever, with rising rates of delinquency, more repossessions, and fewer safe options for those in financial distress. For individuals in Texas and beyond, understanding what’s happening and knowing your options can make all the difference.
Subprime Auto Loans: Record Delinquencies and Repossessions
Recent data from industry experts like Fitch Ratings and J.D. Power show troubling trends in auto lending. The percentage of new car buyers with credit scores below 650 surged to nearly 14% in September—the highest for that month since 2016. For subprime borrowers, the proportion of auto loans that are 60 days or more overdue reached a record of over 6% this year. In 2024 alone, an estimated 1.73 million vehicles were repossessed. That’s the largest total since the aftermath of the 2008 financial crisis, signaling severe financial stress among lower-income families.
What’s behind these numbers? Since the COVID-19 pandemic, car prices have jumped while automakers have cut back on incentives that once cushioned buyers. More consumers are turning to used vehicles, longer loans, and stretching their budgets to the limit—only to find themselves with payments they can’t sustain. As wages stagnate and unemployment ticks higher, paying for an essential item like a car becomes next to impossible for many.
A recent high-profile bankruptcy filing by Tricolor Holdings, a lender serving those with thin credit histories or no Social Security number, serves as a warning. The company’s collapse after fraud allegations shows just how risky subprime lending has become, especially for marginalized groups. While most banks keep subprime loans as a small part of their auto-loan portfolios, some automakers have loosened their standards, further exposing vulnerable people to hefty payments and the threat of repossession.
The Real Impact on Consumers
So, what does this mean if you’re struggling with your car payment? First, know that falling behind on auto loans carries real consequences. Missed payments hurt your credit, making future borrowing even harder and more expensive. And the ultimate penalty, repossession, not only strips you of your vehicle but also disrupts your ability to work, care for your family, and get back on your feet.
With average monthly payments now over $750, and nearly 20% of auto loans and leases exceeding $1,000 a month, even middle-income borrowers are feeling the pinch. Used car prices, predatory refinancing offers, and shrinking opportunities for easy fixes only make matters worse.
How Bankruptcy Can Help Car Loan Borrowers
If your interest rate is sky-high and your car payments are burying your budget, bankruptcy may be an option to consider, especially Chapter 13 bankruptcy. Here’s how it can help with car loans in ways many consumers don’t realize:
- Lower Your Interest Rate: In a Chapter 13 bankruptcy filing, there’s an opportunity to lower the interest rate on your car loan. Courts can allow you to pay a more reasonable rate over the repayment period, reducing your monthly financial burden.
- Reduce Your Payments by Restructuring the Loan: Chapter 13 lets you stretch the principal balance you owe over three to five years, typically resulting in a lower monthly payment. Missed payments, arrears, and even collection costs can be included in the plan, removing the threat of immediate repossession and collection calls.
- “Cramdown” the Car’s Loan Value: If you purchased your car more than 910 days (about two and a half years) ago, you may be eligible for a “cramdown.” This powerful bankruptcy tool allows you to reduce your loan balance to match your vehicle’s current fair market value, which may be much less than what you still owe. The remaining amount becomes unsecured debt, which may be partially or completely discharged.
- Stop Repossessions and Collections: Filing for bankruptcy triggers an “automatic stay” which immediately halts repossessions, lawsuits, and creditor harassment. The car can’t be taken while your repayment plan is under consideration, giving you breathing room to work out a long-term solution.
Other Steps You Can Take
Bankruptcy isn’t the only option, but in today’s environment, alternatives may be limited. Here are additional steps to consider if you’re worried about losing your car:
- Refinance, But Be Cautious: If your credit score still allows, refinancing might lower your payment or extend the term. Just be wary as high fees or predatory lenders can leave you in a worse position.
- Communicate with Your Lender: Don’t wait until you’re two months late, contact your lender at the first sign of trouble. While many lenders are tightening standards, some are still willing to negotiate payment extensions, forbearance, or short-term relief.
- Avoid Payday Loans and Title Loans: These quick fixes might seem tempting but often come with exorbitant interest rates and fees, making them far riskier in the long run.
- Seek Legal Advice: Every financial situation is unique. Consulting with a bankruptcy attorney can help you understand your rights and protections, review all available options, and avoid making things worse accidentally.
How Leinart Law Can Help
At Leinart Law Firm, we’ve helped hundreds of Texas consumers overcome overwhelming debt through solutions tailored to their unique needs. Our experienced bankruptcy attorneys can analyze your situation, advise on the best course of action, and protect you from creditor harassment and repossession. Whether you’re considering bankruptcy, want to learn about “cramdown” options, or need help communicating with your lender, we’re here to help.
We know that losing your car isn’t just a financial setback, it can be a life-changing event. Our team is committed to providing confidential, compassionate advice and powerful legal tools to help you regain control of your finances.
Conclusion: Don’t Wait Until It’s Too Late
If you’re one of the millions of Americans worried about falling behind on your car loan, now is the time to act. The consequences of inaction are severe and include credit damage, repossession, higher future borrowing costs. But with the right guidance, you may be able to lower your payments, reduce your interest rate, and keep your vehicle.
Take advantage of the protections available under the law. Don’t let fear or embarrassment stop you from asking for help.
Ready to talk? Contact Leinart Law Firm today for a confidential assessment. Find out if bankruptcy or another solution can help you manage your car loan debt, protect your credit, and keep your vehicle. Your path to financial recovery starts with a conversation—don’t wait another month to get relief.
