A major concern for those in financial hardship is losing a car due to repossession. This often happens when you fail to make regular monthly payments and the lender exercises his right to take back the collateral; sometimes with little or no warning.
But after your car is gone, isn’t the debt also gone? No, you may actually owe more money after the car is repossessed. Although the loan balance would be reduced by the car’s selling price at auction, you are now liable for all collection costs including attorney’s fees, towing, storage, auction expense, late penalties and interest.
It is not unusual to have a $10,000 car loan balance, yet the vehicle sells for only $ 2,500 at auction. In this situation, you would still owe the $ 7,500 difference plus the collection costs. Essentially, you are stuck making car payments on a car you no longer have.
If you are falling behind on your car payments and repossession is likely, you must take action immediately. Repossession and all other collection activities will stop immediately upon your filing bankruptcy papers with the court. Attorney Buckley can advise if bankruptcy is the right solution, or if you have other options.