When debt becomes overwhelming, each of your paychecks becomes crucial. You may not have a penny to waste if you want to stay on top of all of your bills. In fact, you may fall behind even though you do your best to make payments to every creditor every month.
If you are like many Americans, you probably financed the purchase of your car, just like any other expensive transaction. Financing a vehicle means that you can drive even when you don’t have enough money to buy a car outright. Unfortunately, it also means that the car, truck, van or SUV that you drive to your job every day is also collateral for the loan used to purchase it.
When you fall behind on payments, the lender who financed the purchase might decide to repossess the vehicle. That could make it even harder for you to get to work, earn money and pay your bills.
How does repossession work?
Repossession usually starts with the lender warning and then formally notifying the vehicle owner about arrears on their payments. If they don’t quickly resolve the issue, the financial company will then likely start repossession efforts.
The lender retains the services of a repossession expert, often a driver with a specialized vehicle. These professionals track the location of the vehicle and then secure it and transport it to a facility where they store it until the lender claims or sells it.
The person who owns the vehicle likely can’t stop a repossession in process, even if they notice someone loading their vehicle up in the driveway. Once the lender lays claim to the vehicle, the owner may have no choice except to redeem the vehicle by paying the past due amount in full or possibly bidding on the vehicle at an auction.
Bankruptcy stops foreclosure before the lender takes the vehicle
Once the company that finances a transaction reclaims the collateral property, it will be difficult for an individual to get that property back, although it is possible to do so in certain situations. The safer and faster approach will typically involve attempts to avoid repossession.
The automatic stay in bankruptcy is one of the fastest ways to protect your financed vehicle from lender efforts at repossessing it. Any form of bankruptcy will temporarily halt collection activities and give you an opportunity to possibly renegotiate the terms of your loan with the lender and get the count back to positive standing.
Preventing the reproduction of your vehicle may be crucial to establishing your financial stability, as you may not be able to keep your job or meet other household needs without reliable transportation.