Many working professionals in the United States rely on motor vehicle transportation to do their jobs. They need their own vehicle to get to and from their work location reliably. Even when there is public transportation available, it may not have a schedule that aligns with someone’s work hours, and reliability issues are a notorious issue with public transit.
Many professionals and working-class adults do not have liquid capital to purchase a new vehicle outright when they need one. Instead, they finance the purchase with a vehicle loan. Such loans are convenient and often affordable if someone qualifies for a good rate or has another vehicle to trade in against the purchase of their new vehicle.
The downside to such purchases is the fact that the newly-acquired vehicle serves as the collateral for the loan and is, therefore, vulnerable to repossession. Losing a vehicle can put someone at risk of losing their job and numerous other personal hardships. Some people who are worried about their financed vehicles file for personal bankruptcy.
Bankruptcy temporarily prevents repossession
The vehicle is the collateral for the loan, which means the lender can lay claim to it at any point until the owner pays the loan in full. Lenders who have not received monthly payments on time could repossess a financed vehicle at any point. They won’t necessarily give someone advance notice before sending a tow truck.
Anyone who has missed vehicle payments could be at risk of losing their transportation and all of the money they invested in the purchase and maintenance of the vehicle. Bankruptcy can help prevent repossession. The automatic stay that results from a bankruptcy filing will stop vehicle repossession and other collection activity until the courts resolve the filing.
It can help to rework loan terms
Lenders may be more likely to cooperate with someone trying to restructure their loan during bankruptcy proceedings. In a Chapter 13 filing, part of the process involves negotiating a repayment plan with lenders so that someone can regain control over their finances.
Those who are worried about losing the vehicle that they need for their job could pursue a personal bankruptcy as a way of protecting their property. Filing for personal bankruptcy can potentially help people to protect their assets and eliminate stressful collection activity.