Some people decide to file for bankruptcy because their finances gradually worsen. Every month, they incur new fees and more interest because of their credit card balances. They may struggle to make even the minimum payments required by their various financial obligations. Bankruptcy can be a way to halt the slow progression of their debt.
For others, bankruptcy might be an emergency maneuver employed to protect valuable assets or avoid a lawsuit related to their debts. Those served with creditor lawsuit paperwork often turn to bankruptcy to protect themselves from litigation. Those at risk of losing valuable resources due to collection activity may also decide to file for personal bankruptcy.
A Chapter 13 bankruptcy can be a viable solution for individuals worried about losing their motor vehicles to repossession. The best time to act is usually before a lender reclaims a vehicle.
When is repossession a concern?
Many people can only afford to purchase a motor vehicle with a loan. The vehicle serves as collateral for the loan, which can make it easier for people to qualify. Unfortunately, the vehicle is then at risk of repossession until the owner pays the entire balance, along with any interest or fees.
Repossession can occur after as little as a single missed payment. Lender policies and contract terms determine how quickly repossession might occur. Owners generally cannot depend on receiving advance notice. They need to take prompt action to protect themselves from repossession before it occurs.
How does Chapter 13 bankruptcy help?
There are three ways that Chapter 13 bankruptcy helps those at risk of vehicle repossession. The first is the automatic stay. The day that an individual files, they receive a stay that protects them from repossession and other collection efforts.
The second is the repayment plan. Chapter 13 filers may be able to renegotiate their payment arrangements to make them more sustainable. Finally, the discharge of other debts can make it easier for those with financed vehicles to afford their monthly payments.
Filing for Chapter 13 bankruptcy can help people course correct their financial circumstances and preserve their most valuable assets. People who know about the basics of the bankruptcy process can take appropriate action to protect their resources during times of financial hardship. Vehicle owners at risk of repossession may benefit from learning more about bankruptcy before they lose their transportation.