If you’ve fallen behind on your car loan, you’ve likely received letters from the bank indicating that if you don’t bring your loan current, you could lose your car. If you’re struggling financially between mortgage payments, credit card bills and the cost of utilities and food, you may not have enough money to bring your loan current. What, then, are the options available to you?
Understanding Car Loans
First, it’s important to remember that a car loan is a contractual agreement between you and the bank or creditor. Under the terms of your loan, the creditor has a right to repossess your car if you fail to abide by the terms of your loan. In Medford and throughout most of New Jersey, most car loans list the rights and obligations of the borrower. In many cases, the creditor has a right to repossess a car when you, the borrower, fail to make payments according to the terms of the loan. As a result, in Medford your car can be repossessed without the creditor needing to first get permission from the court.
Defaulting on a Car Loan — What Could Happen
If you default on your loan, the creditor that provided you with the loan is on the hook for any money you still owe. Consequently, creditors will repossess or “repo” your car in order to resell it in an attempt to recover some portion of the amount you still owe on it. Under the law, however, if your car is repossessed, your creditor must notify you of their intent to sell or auction off your car.
If resold at an auction, the creditor must provide you with information concerning the auction so you have an opportunity to participate and bid as well. On the other hand, if the creditor decides to sell your car privately, you must be notified as well so you have a chance to pay off your loan and any storage or possession fees you’ve incurred.
Deficiency Judgments and Car Repossessions
If you can’t pay what you owe on your car and your car is repossessed, your auto lender may enter a deficiency judgment against you. A deficiency judgment essentially involves your creditor suing you for the difference between the amount you still owe on your car and the amount it was resold for minus reasonable sale costs. For example, if you purchased your car for $30,000 and you still owe $20,000 on it, your creditor can sue you for the difference between the amount you still owe — $20,000 — and what they were able to sell it for. In this case, if your creditor sold your car for $10,000 and netted $8000.00 after sale costs, there is still an additional $12,000 they were not able to recover. As a result, they can enter a deficiency judgment against you for that $12,000.
Bankruptcy and Car Repossession — the Automatic Stay
If you aren’t in a financial position to bring your car loan current, filing for Chapter 7 or Chapter 13 can temporarily halt repossession actions against you. Under the terms of Chapter 7 and Chapter 13 bankruptcy, creditors and banks are required to halt collection, foreclosure and repossession actions against you. Consequently, if you’re financially struggling with monthly bills and a mortgage, filing for bankruptcy can help you keep your car while you reestablish your financial balance.
Why You Need an Attorney If You’re Facing the Repossession of Your Car
Car repossession can be a tricky matter. Creditors have to follow specific and detailed procedures. If they do not do so, you may have defense to the repossession or a law suit for a deficiency. Even if that is not the case, you have a major debt problem. Hiring a Medford bankruptcy attorney to review the actions of a creditor, or to discuss options to deal with this situation is critical.
Don’t let creditors intimidate you or repossess your car. Contact Medford, New Jersey, bankruptcy attorneys at Neuner & Ventura, LLP, today to learn how we can help you. Let us help you take back control of your life!