We’ve been seeing an awful lot of press and hearing many political speeches on the subject of personal bankruptcies and about home foreclosures. In my bankruptcy blog recently, I’ve been writing about some of the different strategies I discuss with my clients who are homeowners to help them avoid having the sheriff sell their home.
One area of financial hardship that hasn’t been making the headlines so often, but with which I have been dealing a lot in my bankruptcy law offices in Indiana, is auto repossession. I find that auto loan borrowers are having a really hard time, especially when there’s been a job loss or an illness in the family. Just as many people bought homes that were really too much for them to afford, the same thing is happening with cars. The number of “repos” has risen along with the number of bankruptcies and foreclosures.
An auto loan or lease is a secured loan, and until the loan is totally paid off, the creditor (who could be a dealer, a bank, a leasing company, or sometimes a collection agency or company that has bought the debt) has the right to take the car if the payments are not made. Once the car has been repossessed, the creditor may decide to sell it, either at an auction or privately. Then the creditor may pursue the individual for the remainder of the loan.
As a consumer bankruptcy specialist, I help clients seek the best possible solutions to all their financial issues, whether filing bankruptcy is their best course of action or not. When a car is repossessed, the debtor may still have the option of buying back the car by paying the amount owed on it, plus any expenses the repo company incurred. (By the way, any personal possessions that were in the car must be returned to the debtor.) Sometimes the creditor lets the borrower “catch up” on the missed payments and reinstate the contract.
Now, when a bankruptcy is being filed at or near the time of the repo of the car, things may get a little more complicated. Once the bankruptcy filing is official, the automatic stay prevents the car company from taking the car. In fact, if a Chapter 13 is filed within ten days of the repossession, the creditor must give the car back.
However, if car payments were missed and the car was seized and “disappeared” into the hands of the lender weeks before the start of the automatic stay, matters could get stickier. Most people absolutely need their car to get to work. Without work, their bankruptcy choices will be more limited, and their situation can really begin to deteriorate.
I think you can see why I keep repeating the rule about “Do it now!” when it comes to talking with a consumer debt adviser. The key is to seek professional help before the choices begin to narrow and a bad situation turns worse. The bankruptcy and repossession laws in Indiana are designed as a safety net for citizens who are in financial trouble, but the law can’t help if you don’t know how to use it.