Are you having trouble paying your bills due to a high-interest car loan? You are not alone. In fact, auto loans make up $1.30 trillion of the total household debt. There are very high interest rate loans out there, some as long as 7 year loans. Moreover, about 33% of the people are behind on car loans. With the increase in high-interest auto loans, it is not surprising to find that about 33% of people are behind on their payments. So, what are your options?
Bankruptcy is a viable option to reduce or eliminate your debt entirely. When you file for bankruptcy an automatic stay helps protect you from creditors. This is a court-ordered injunction. It prevents creditors from seeking legal action against you after filing for bankruptcy. Without the filing, creditors can contact you by mail, phone, text, and so on. Consequently, you may be overwhelmed if you are having difficulty repaying your debts. After your filing, your creditors must stop all communication with you. Now, they will send any inquiries to your attorney instead. This can be particularly helpful if you have a pending foreclosure, wage garnishment, repossession, or eviction.
You also have the option of surrendering your vehicle. This is a voluntary process in which you tell your lender that you will not be continuing payments and that you want to surrender your car. You and the lender set a time and place to bring the car and surrender the keys. The lender will in turn sell your vehicle. In the event the vehicle does not sell for the full amount of your balance, you run the risk of owing more money.
In a Chapter 7 bankruptcy, redemption allows you to wipe out an existing loan by paying off the value in a lump sum. This does not apply for your home or other types of real estate. Redemption is a good option when your car is worth a lot less than the balance of your loan. This can be difficult if you do not have enough money to pay the agreed upon lump sum.
A reaffirmation allows you to enter into a new contract with your existing lender. This will be kept out of your bankruptcy. This means that you will agree to continue paying back the lender as if you had not filed for bankruptcy. However, if you do not keep up with payments, your vehicle can be taken, sold, and you can be billed for any remaining balance that is owed.
When your car is worth less than what you owe or you are paying too much in interest, you have the option of cramming down your car loan through a Chapter 13 bankruptcy. This can reduce your balance, cut interest rates, and reduce your payment. In order to take advantage of a cramdown loan, you must file for Chapter 13 bankruptcy and have owned your car for more than 910 days. In your plan, you can propose to pay the lender only the value of the car instead of your entire balance.
Still Unsure What to Do?
At the Law Office of Daniela Romero, we believe in relationships that are based on trust. Before we work together, we would like to get to know you and we would like you to get to know us. We want you to be sure you are the right fit for us and that we are the perfect fit for you. This will allow you to be completely comfortable sharing intimate and difficult details of your case, so we can offer you representation to the fullest extent of the law. Call us today to set up a free consultation.