The average sale price for vehicles has increased substantially in recent years. Many people require financing to afford a reliable vehicle on the current market. Unfortunately, that means that the vehicles that people rely on to take care of their families or get to work every day are at risk if they fall behind on their loans.
Typically, those that offer financing for vehicle purchases can be generous in part because the vehicle serves to secure the loan. Should someone default on a car loan, the lender can repossess the vehicle. Repossession means losing transportation and possibly the money invested in the vehicle’s purchase.
Repossession does not require formal advance notice
People sometimes expect that lenders providing vehicle loans will give them a chance to catch up on missed payments when repossession is possible. They may conflate the protections that exist for mortgage foreclosures with their rights if they miss car loan payments.
Despite what people might believe or hope, lenders are under no obligation to provide advance notice before repossessing a vehicle. Instead, the rules that they apply to repossessions will likely be in the original loan paperwork. Many lenders include terms that allow them to initiate repossession after as little as a single missed payment. By not providing advance notice to the borrowers in arrears, lenders can limit the chances that somebody would move or attempt to hide the vehicle to avoid its repossession. They also leave people feeling shocked and panicked when they realize that they suddenly do not have transportation.
Bankruptcy can prevent repossession
Given that all it takes is missing a few payments and that lenders will probably not send a warning notice ahead of time, those who believe their vehicles are at risk of repossession may want to act assertively. When people file for bankruptcy, the automatic stay granted by the courts will halt collection activity, including vehicle repossession. In certain scenarios, bankruptcies filed shortly after repossession might help someone renegotiate with their lender and regain possession of their vehicle. However, the best chance of success usually comes from those who file before the vehicle leaves their possession.
Knowing the right steps to take during times of financial hardship can make a major difference for those who have fallen behind on their financial obligations. Seeking legal guidance is often the best way to receive clarity and personalized information in this regard.