While it goes without saying, it’s important to remember that a car loan constitutes a legal agreement between you and your creditor. As such, if you fail to make car payments it is within the legal rights of your creditor to repossess your car. It is important to read the terms of your car loan in order to determine what you and your creditor’s rights and obligations are, and whether or not the creditor can repossess your car without going to court or sending you a warning. If you are behind on car payments and are unable or struggling to pay your other debts, filing for bankruptcy may be the most effective way of keeping your car.
In the short term, once you file for Chapter 13 bankruptcy, an automatic stay is placed on your secured debt, preventing creditors from pursuing collection or repossession actions against you. This stay will prevent your car from being repossessed and sold privately or at auction.
Repossession of Cars and Creditors’ Rights
In general, if a car loan is not paid, the creditor who financed the loan stands to lose money. Consequently, in order to reduce losses on defaulted car loans, creditors use “repo men” to repossess cars whose owners have defaulted on their loans. Once a car is repossessed, a creditor can sell the car to recover all or a portion of the outstanding balance on the loan. Once a creditor decides to resell your car, however, they must wait for a period of 10 days to allow you the opportunity to cure the terms of the defaulted loan. If a Chapter 13 bankruptcy is filed within this 10 day period (or even after this period if the car has not been sold), the automatic stay requires that the car be returned to you.
Deficiency Judgments and the Sale of Your Car
If a creditor repossess your car and sells it for less than what you owed on it, he or she may seek a deficiency judgment against you. In essence, a deficiency judgment allows a creditor to sue you for the difference between what you owed on your car and for what it was sold. For example, if you owed $20,000 on your car and the creditor was only able to sell it for $10,000, he or she can sue you for the difference between $20,000 and $10,000 — that is $10,000. It’s not unusual, however, for creditors to ignore certain protocols and proper procedures when repossessing or selling a repossessed car. Should this happen, creditors would not have legal grounds for issuing a deficiency judgment against you. For this reason, it’s essential to work with an experienced bankruptcy attorney or repossession lawyer who can protect and assert your rights.
Protect Your Car during Bankruptcy — Contact Leinart Law Firm Today
How contracts and financial agreements are treated in a court of law can be affected as much by what the parties don’t do as by what actions the parties perform. For example, if your creditor regularly accepted late or partial payments on your car loan, under the principle of estoppel his or her silence on the issue may be interpreted as a change in the terms of your original contract. If your car was repossessed or sold without proper notification, you may be able to sue your creditor.
While filing for bankruptcy can help protect your car in the short term, if you can’t stay current on your car payments or are facing repossession of your car, it’s essential to contact a bankruptcy lawyer or repossession lawyer today. At the Dallas, Texas, bankruptcy law office of Leinart Law Firm, we work closely with clients to help them get back on their financial feet and regain control over their lives. To learn how we can help you, contact Dallas bankruptcy attorneys at Leinart Law Firm today. For immediate assistance call toll free 1-800-518-3328.