If you have fallen behind on your payments, your car could get repossessed. Whether voluntary or involuntary, a repossession will hurt your credit score. However, there are some advantages to a voluntary repossession because it gives you a measure of control over the situation. The key is to act before you start missing payments. If you are having financial troubles and anticipate that you may be unable to meet your upcoming financial obligations, you can mitigate the consequences by calling an Ohio bankruptcy lawyer today. Call Luftman, Heck & Associates today at (216) 586-6600 or use our online contact form.
What Can I Do If I Can’t Make My Car Payments?
Once you’ve started missing payments, you are vulnerable. Your creditor will have the legal authority to repossess your car – often in the middle of the night, when you least expect it. An involuntary repossession will be inconvenient, and in some cases, humiliating. But you can avoid this by taking the following steps before you miss a payment:
- File for bankruptcy – Filing for Chapter 7 or Chapter 13 bankruptcy with the help of an experienced attorney presents advantages if you are in serious financial trouble. A successful filing will result in an automatic stay while your bankruptcy case is open, during which time creditors cannot repossess your belongings unless the court authorizes it. Some creditors may be unwilling to go through the time and expense of petitioning the court to overturn the stay, giving you some breathing room.
- Negotiate with your creditors – If your financial troubles are not particularly serious, filing for bankruptcy may not be your best option. Sometimes, you just need a month or two to get back on your feet again. In such cases, you should reach out to your creditors and explain your situation. Often times, creditors are willing to restructure your repayment plan or allow you to make a late payment. The key is to approach them before you start missing payments.
- Offer voluntary repossession – If your creditors are unwilling to negotiate the terms of your loan or let you make a late payment, you may offer to voluntarily repossess your car. This is your last bargaining chip, which may convince the creditor to settle or reduce your debt. They may be willing to do so because you are avoiding them the expense and hassle of hiring a credit collection agency and going through an involuntary repossession, which always presents risks.
Moving forward, your credit report will include the repossession (whether voluntary or not) and any late payments. This will hurt your credit score and make it much harder for you to obtain favorable loans in the future. When your creditor repossesses the car, they will generally sell it and apply the proceeds to the loan. Whatever loan balance is left over is called the deficiency balance, which you will have to pay eventually. This deficiency balance may be turned over to a debt collection agency, which can further damage your credit score.
An Ohio Bankruptcy Attorney Can Help
You should consult with an experienced bankruptcy attorney to determine whether its preferable for you to file for bankruptcy or to go through a voluntary repossession. A legal professional can also help you negotiate with your creditors, which may help you avoid both bankruptcy and a repossession. Don’t wait until you fall behind on your payments to act. Call Luftman, Heck & Associates today at (216) 586-6600 or use our online contact form to schedule your free consultation and take control over your financial situation.