People often find themselves contemplating bankruptcy because they’re in over their heads with monthly car payments.
If you’ve been affected by COVID-19 and are unable to meet your financial responsibilities, you need a plan for debt relief and resolution.
When Car Payments Become Too Much
A car you once loved can become a major problem based on your changing individual circumstances, such as the loss of a job or the declining economy overall.
Lenders, however, may not be understanding or sympathetic when you try to give back a vehicle because you can no longer afford it.
While that property could be repossessed, this isn’t always the end of the story.
Chapter 7 Bankruptcy and Car Loan Payments
You might have to personally guarantee your car loan after repossession occurs with a vehicle you can no longer afford, an auction will be scheduled.
This means that the car goes up for sale, but even once it’s sold, you still owe the difference between the sales price of the vehicle and what you owed on the note.
When your debts are forgiven by the company, there will still be tax consequences. In a Chapter 7 bankruptcy, you may be eligible to surrender collateral that serves as security for a loan without any further obligations for the remaining debt after the auction sale concludes.
This is one way of erasing a personal guarantee from the note when it happens because you can give back the property and be done. The lender can’t take any further action after you do this.
If you can no longer afford your boat or your car payment, you may be eligible to return the vehicle directly to the lender and walk away. Bankruptcy will have a negative impact on your credit score, but a repossession will as well.
A repossession scenario means that your credit is damaged and you’ll still be responsible for making payments on property that you’ll no longer own.
It may be in your best interests to schedule a consultation with a bankruptcy lawyer to learn your options when you’ve gotten in over your head with vehicle payments.
Get a Free Chapter 7 Bankruptcy Consultation!
Ready to talk options? Contact the Law Office of Joel R. Spivack at 856-488-1200 or online to get started today.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney/client relationship. If you are seeking legal advice, please contact our law firm directly.