NON-BANKRUPTCY

Here are some non bankruptcy events that may take place if you miss payments on your car:

1. Repossession of car. If you do not make payments when due, you are in default under your financing contract. Your lender can take possession of the vehicle as long as she does not breach the peace.


2. Right to sell the car. The lender may sell the car if you are in default. The amount on the loan is almost always higher than the sales proceeds so you will be liable for the “deficiency” (the excess of the sales proceeds over the loan). But there is a good chance that the dealer will not take you to court to collect this deficiency.


3. You can make a deal with the car dealer. Here are some alternatives:
   • Reaffirm your original agreement by agreeing to make up missed payments and then staying current.
   • Buy the car for the balance due.
   • Buy the car for its estimated value.
   • Just abandon the car—let the dealer have it.
   • Make a new deal which: extends the term of the loan; lowers the interest rate; allows you to skip a few payments and make them up later.

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BANKRUPTCY

By filing for bankruptcy you can stop a repossession temporarily but if you don’t make up the missed payments and stay current the dealer will be able to repossess later. You have these choices of dealing with the car in bankruptcy.

1. Redemption. You pay the dealer the value of the car in a single cash payment. Any amount you owe is wiped out.


2. Reaffirmation. This is an agreement to waive Bankruptcy as to the reaffirmed debt and pay the debt according to the original agreement. If you stop paying later on the dealer can repossess the car.


3. Surrendering the car frees you from your debt.

You must REDEEM (buy) the car or REAFFIRM your original deal if you want the bankruptcy court to protect your right to keep the car. If you fail to redeem or reaffirm by the deadline—30 days after the Creditors Meeting—the court will no longer protect your car from repossession.

EXAMPLE: John signed a five-year car note. After making payments for 3 years he files for Chapter 7 Bankruptcy. He still owes $18,000 on the note. If he signs a reaffirmation agreement he can keep the car as long as he keeps making the payments. If he surrenders the car he will discharge the $18,000 liability on the car note. If, however, he tries to keep the car without reaffirming or redeeming, the court will no longer prevent repossession.

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Questions? I can help. Call me on my cell now. I am an attorney and I give advice on Bankruptcy and Foreclosures in Louisville, Kentucky and Southern Indiana. CALL ME ON MY CELL NOW. I WILL PERSONALLY PICK UP OR CALL YOU BACK WITHIN 20 MINUTES. TEST ME! 502.592.9771.