Financing a vehicle purchase can be a common-sense choice. It is a fast way of making a purchase when you need a vehicle. You don’t have to spend months saving or restrict yourself to the low-quality vehicles that you can afford with the cash that you have on hand.
Financed vehicles are one of the most common sources of secured debt. The vehicle that you depend on to get to work and to transport your family also serves as the collateral for the loan that you used to purchase it. Since it is collateral, the lender can repossess your vehicle if you fall behind on payments.
What steps should you take if you believe that you are at risk of vehicle repossession?
Review your loan paperwork
One of the first and most important steps to take when you have missed a payment or two is to look at the paperwork for your vehicle loan. Lenders often include clear explanations of their policies regarding past-due accounts and vehicle repossession.
They may tell you exactly how many payments it will take before they send out a tow truck to recover your vehicle. Even if the paperwork does not include those terms, there may be other information that could help you negotiate with the lender.
Talk to the financing company
The process of repossessing a vehicle is expensive. People often defend their vehicles with physical force and firearms, so the drivers repossessing vehicles will charge as much as they can even for uneventful repossessions. Beyond that, there is the diminished value of the vehicle to consider. Lenders often can’t resell the vehicle for the amount due on the loan. It is advantageous for the lender to work with you in many cases.
If you call them and explain your situation, you may be able to arrange a payment plan or renegotiate the terms of your loan. Many people benefit from having professional help with this step, as large financial businesses are more likely to take a professional like a lawyer seriously than a client who has fallen behind on your payments.
Move to prevent repossession
If your lender won’t work with you or you simply aren’t in a position to catch up on your missed payments quite yet, you can take immediate action to prevent the repossession of your vehicle before it occurs. You won’t necessarily get a warning before they take your vehicle either.
When you file for personal bankruptcy, the courts grant an automatic stay that will temporarily halt all collection activity. Pending lawsuits and repossessions will have to stop until your case goes through court. Unless the lender files for special hearings to lift the automatic stay, you won’t have to worry about losing your vehicle until you resolve the bankruptcy filing.
Filing bankruptcy before vehicle repossession can be a more successful tactic than trying to get a vehicle back via bankruptcy after a lender repossesses it.