Unfortunately, some people in Louisville fall on hard financial times. When this happens, they may find they fall behind on their bills, including car payments. If they miss too many car payments, their car may be repossessed. However, this is often not the end of the story.
Even if a person's car is repossessed, it is possible that the person will still owe some money on the car loan. This is because sometimes, the price the car sold at auction is less than the entire balance left on the loan. This amount is known as a car loan deficiency, which the person who originally took out the loan for the car is responsible.
This can cause further financial hardship as it is likely that, if someone could not afford their car payments, they may not be able to afford a car loan deficiency. If they cannot pay the car loan deficiency, it could lead to a lawsuit brought by the lender, which could result in the person having their wages garnished or a lien or levy placed on their property.
Is there anything that people in such situations can do to deal with a car loan deficiency? One-step they may want to consider is filing for bankruptcy.
Once a person files for bankruptcy, the lender can no longer pursue collections activities, including collecting on a car loan deficiency. For example, if a person files for Chapter 7 bankruptcy, they may be able to pay off the current value of the car in a single payment. This will then waive any remaining car loan deficiency balance.
Moreover, if there is a pending lawsuit, filing for bankruptcy may also stop that lawsuit. But, if a person's wages are already being garnished or there is already a lien or levy against them, then in addition to filing for bankruptcy, the person has to file a motion to put a stop to these activities.
Whether to file for personal bankruptcy is a big decision. Some may find that it is in their best interests. Those who are facing a car loan deficiency, and are wondering how filing for bankruptcy can help them, may want to bring the matter up to a bankruptcy attorney who can offer legal advice.
Source: Auto Credit Express, "How Bankruptcy Can Get Rid of Your Car Loan Deficiency," accessed Feb. 13, 2017