People often rely on their vehicles to care for their families and get to work on time. Having independent transportation is critical to professional development and the maintenance of a household. Most people cannot afford to purchase a vehicle outright with cash.
They instead finance the purchase with a loan. The vehicle serves as the collateral for the loan, which makes it easier for those with compromised credit to purchase the vehicles that they need. Unfortunately, the vehicle is then vulnerable to repossession at any point until the owner pays off the loan in full.
Lenders who have not received timely payments may decide to repossess a vehicle. They may hire a tow truck driver to collect the vehicle from outside of an individual’s home or workplace. How much advance notice do people receive before a repossession occurs?
Advance notice is not mandatory
Given how important vehicles are for people’s financial stability, they may assume they have certain legal protections if they are at risk of repossession. After all, lenders intending to foreclose on a primary residence typically need to communicate in advance and give owners an opportunity to redeem the property.
Unfortunately, the same grace is not necessarily available in a repossession scenario. Neither federal regulations nor state statutes mandate that lenders provide warning ahead of time before repossessing a vehicle. In fact, some lenders may intentionally avoid providing advance notice because people might try to tamper with location devices or hide the vehicle from repossession attempts.
How quickly lenders can repossess vehicles depends in part on the terms included in the initial loan documents. In some cases, lenders can repossess vehicles after a single missed payment. Vehicle owners worried about repossession may want to consider filing for personal bankruptcy.
How does bankruptcy help?
Bankruptcy can help delay or prevent repossession. Lenders are subject to an automatic stay when a borrower files for bankruptcy. They have to halt collection activity, including repossession.
In some cases, lenders may be open to renegotiating the terms of the loan as part of the bankruptcy process. A successful bankruptcy can eliminate some of the financial obligations of the filer, making it easier for them to make mandatory payments in the future.
Taking action before lenders repossess vehicles can help people protect one of their biggest investments. Personal bankruptcy can help protect people from financial setbacks that can have a ripple effect on their circumstances.