People talk about vehicles like they are a luxury and driving like it is a privilege, but driving and vehicle ownership are essentially necessary for professionals and those trying to support a family. Losing your vehicle could cause a ripple effect that impacts everything from your employment to your health.
When you own a financed vehicle, your car, SUV or truck serves as the collateral for the loan that you used to purchase your vehicle. When you fall behind on payments, the lender may physically repossess the vehicle. Usually, once that occurs, it will be very difficult, if not impossible, for someone to get their vehicle back.
How can you stop a repossession from taking place?
Know what your loan paperwork says
One of the most important ways to protect yourself from an unexpected repossession of the vehicle that you rely on for your job or to take care of your family is to make sure that you remain in compliance with the terms of the loan.
For example, some lenders will start the repossession process if you miss just one payment. Others may give you a longer grace period before they begin aggressive collection efforts or repossession. Knowing what your contract says that your lender can do allows you to make an informed decision about when to take action.
Know your rights
Generally speaking, the company that lent you money for your vehicle does not need to provide you with advanced notice of a repossession the way a mortgage lender would about a foreclosure. After all, you could move the car and make repossession much more difficult for the company.
That lack of forewarning is why it is crucial to know the terms of your contract. Once you missed enough payments to be at risk of repossession, be ready to act to protect your investment in the vehicle.
Bankruptcy can temporarily halt repossession attempts
If the lender has not yet physically secured your vehicle, a bankruptcy filing can protect you from this aggressive collection tactic. The automatic stay will temporarily prevent the lender from any other collection efforts until the courts resolve your bankruptcy filing.
In some cases, individual creditors can request that the court lift the automatic stay or exclude their debt from the bankruptcy. However, your filing puts you in the position both to free up money to make payments and to potentially renegotiate your loan, especially if you filed a Chapter 13 bankruptcy.
Recognizing when your most valuable assets are at risk can help you make strategic choices about filing for personal bankruptcy.