Can A Repossession Hurt You?

Yes, and in many cases, this pain comes very quickly. Many dealers now offer generous financing terms even to borrowers with poor credit. So, as soon as storm clouds gather, they take advantage of the fact that they can begin the repossession process if the borrower falls a single month behind. Many vehicles have remote ignition disablers which lenders activate even earlier.

Repossession not only hurts your credit. It also hurts your family, which is suddenly deprived of its primary means of transportation. A Chicago bankruptcy attorney helps you avoid this pain. Furthermore, an attorney uses bankruptcy to negotiate more favorable payment terms, such as a lower interest rate. Finally, an attorney can unlock some advanced options which, in many cases, could save your family thousands of dollars in future vehicle payments.

Automatic Stay

The moment that debtors file their voluntary petitions, the Automatic Stay usually takes effect. Section 362 of the Bankruptcy Code blocks repossession and other creditor adverse actions. Civil judges have the same power. However, these judges often take weeks to reach decisions, and that decision is often “no.” Bankruptcy is a much better option, especially if families don’t have several weeks to wait and they want to avoid uncertainty.

Creditors can only bypass the Automatic Stay if the judge gives them special permission to do so. This permission is almost impossible to obtain. Generally, the bank must prove the borrower threatened the collateral (e.g. I’m going to drive the car off a cliff).

Usually, the Automatic Stay remains in effect as long as the case is active, a time period which could last up to five years. Sixty months gives debtors plenty of time to catch up on payments, allow the bank to voluntarily repossess the vehicle, or make another decision.

As mentioned above, the Automatic Stay also gives a Chicago bankruptcy lawyer a chance to renegotiate payment terms. Legally, bankruptcy cancels the existing loan agreement. So, almost everything is negotiable. And, since the debtor possesses the vehicle, the debtor has an edge in any negotiations.

Asset Exemption

Illinois law allows debtors to exempt up to $2,400 in vehicle equity. So, if the debtor has more equity than that, the trustee cannot touch the vehicle.

This protection is almost always sufficient. Most new cars have extremely high values and practically no equity. Car loans are amortized. So, almost all payments for the first half of the loan go to prepaid interest. At the other end of the scale, most used cars have very high equity but almost no financial value. So, the percentage of equity is largely irrelevant.

Redemption could be an option as well, especially in a Chapter 13 bankruptcy. Assume that, at the time of filing, Tom owes $10,000 or a car that’s only worth $5,000. If he pays the lender an additional $5,000 by the time the judge closes the bankruptcy, the lender might have to tear up the loan, meaning that Tom owns the car free and clear.

 Work With a Thorough Cook County Lawyer

No matter what kind of financial problem you are having, bankruptcy could be a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. The sooner you reach out to us, the sooner we start fighting for you.

Source:

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