When purchasing a vehicle, most people don’t have the cash on hand to purchase the car. Instead they must get a car loan to purchase it. When this happens, the car becomes collateral for the loan, this is what we call "secured."
Now you've fallen behind on the payments which risks the immediate repossession of your car. Depending on the company, if you’ve missed one or more payments, you could walk outside to find your vehicle gone.
A repossession agent can break into your car and either drive it away or tow it. What we call repossession is a process known as "self-help." This is because the creditor can help themselves without going to the Court for permission. In most states the creditor doesn't even have to inform you that they are repossessing the car. There are a few things that you need to know about self-help though:
- A self-help repossession is not allowed to breach the peace. Meaning if the person repossessing the vehicle threatens violence, continues to repossess the car despite objections, or trespasses to gain possession, then the repossession is wrongful.
- A creditor cannot repossess a car from an active duty military personnel when the car was purchased before the individual entered active duty service. This could even extend to a family member of an active duty military, but only if they apply to the court for an order that would prohibit the repossession of the vehicle.
- Virginia is considered a curing state, which means that the creditor must give you the opportunity to pay off the deficiency before they can repossess.
When the creditor repossesses the car, their next option is to sell it and often it will be for an amount less than what you owe on it. If this is the case, then you may find the creditor getting a judgment against you for the remaining balance. That judgment will often times lead to a garnishment. This can lead to you owing thousands of dollars that you don’t have.
The next question is, “But what if the car has already been repossessed?” A creditor must give you notice that allows a “reasonable time” before they sell it. Ten days is usually considered reasonable time. This means that you have ten days in order to use a couple of different options.
- You could redeem the vehicle. This means that if you pay the full remaining amount due plus expenses you can recover the repossessed vehicle. Often this isn't an option for people because they wouldn't have fallen behind on the payments if they could pay full value for the car.
- You can attempt to negotiate with the creditor. When a car has very little value you have more of a bargaining chip because the creditor might prefer to work something out with you as opposed to the expenses of a sale that won’t even cover the loan.
- You can get your car back by filing for bankruptcy, even after it’s repossessed, if you do so before the creditor sells it. Choosing to do a chapter 7 would mean you would still need to redeem the vehicle but choosing to do a chapter 13 could set you up with a repayment plan that would allow you to keep your vehicle as well as the possibility of getting a lower payment.
You have options, and bankruptcy just might be one of them.