If you are facing overwhelming debt and you start to miss payments, lenders may want to reclaim the assets that you have purchased. For things like credit card bills, there may not be any assets, as these are unsecured debts. But with other types of debt, there is a clear asset that is connected to the loan, such as a home or a car.
You may have heard that filing for bankruptcy is one way to stop foreclosure. The lender at least has to wait until the bankruptcy case has concluded, and an automatic stay is applied to the foreclosure case. The foreclosure cannot proceed until the bankruptcy is finished, so the person gets a bit longer to stay in their house as they look for ways to get current on their mortgage and keep their home long-term.
But what if you just have a car loan? Would the same basic principle apply?
Permission from the court
In many ways, yes, the automatic stay still applies. It also stops other types of collection efforts, such as a credit card company that is calling you and trying to get you to pay your overdue bill.
However, with car loans in particular, financial institutions sometimes do have the right to seek permission from the court to repossess the vehicle. This does not mean the court will grant it, but there is the potential. The lender does need to ask the court for permission because the automatic stay is in place.
There are some steps you can take to prevent the repossession, such as reaffirming the car loan. Additionally, using bankruptcy to clear up your other debt may make the loan affordable again for you in the future.
Seeking long-term solutions
In this sense, an automatic stay is just a short-term solution. But bankruptcy can help you seek long-term solutions for your financial issues, so be sure you know what legal steps to take.