A car or truck is the primary mode of transportation for most people in Wayne County. The loss of their vehicle can represent not only a general hardship but even a strain on their employment.
Aside from houses, vehicles are one of the most expensive items most people buy. Once you miss a loan payment, the late fees and continuing payments can quickly become insurmountable. You may face repossession. Find out how repossession works in Michigan and how your Chapter 7 bankruptcy can help you get your vehicle back.
What is Vehicle Repossession?
When you finance your vehicle, your lessor has the right to timely payments. If you miss payments, the lessor has the right to repossess, or take back, your vehicle. In Michigan, they can repossess your vehicle without prior warning. However, they do have to provide you with a letter afterward informing you of the repossession and the possibility of getting the car back.
In fact, repossession can be voluntary or involuntary. With voluntary repossession, you acknowledge that you can’t afford the payments and you return the vehicle to the lender. With involuntary repossession, agents take the car without your permission. In Michigan, they may not use violence, nor may they enter your home uninvited.
The repossession company may remove loose items stored in the vehicle and store them at a cost to you. They must inform you of the method for collecting your property, however.
How To Get Your Car Back After it Has Been Repossessed
In order to get your car or truck back, you can redeem the property or reaffirm the debt. The first option, redemption, means you pay off the loan. Chances are, if you had the funds to pay off the loan in full, you wouldn’t have gotten behind in loan payments. That said, you might be able to sell other items or ask for a personal loan from a family member. You’ll likely have to pay repossession costs, too.
You can also reaffirm the debt. With this process, you must talk to the lender. You work out an arrangement for a new payment plan with the lender. You’ll need to ensure the new payment plan is within your budget. If you default on the loan again, your lender will probably hire a repossession company again.
With both redemption and reaffirmation, you must act quickly. Lenders have the right to auction off repossessed vehicles. You often have roughly 10 days to get the vehicle back.
If the lender does auction off your vehicle, you may still owe on the loan. You’ll have to make up the difference between the outstanding balance of the loan and the amount the lender received in auction. The lender can sue you for a car loan deficiency, which represents this difference.
Chapter 7 Bankruptcy Can Stop Vehicle Repossession
When you file for Chapter 7 bankruptcy in Michigan, you have more options for recovering your vehicle. Ideally, you should file for bankruptcy before your car is repossessed. In that case, an automatic stay goes into effect, which means creditors can’t try to collect on your debt — the stay also covers repossession.
Filing for Chapter 7 bankruptcy also gives you some leeway with both redemption and reaffirmation. As part of the bankruptcy process, you have a chance to buy back your car at its current value rather than pay back the outstanding loan. Typically, the current value is lower. You have to make this payment in a lump sum.
With reaffirmation, the negotiation process is the same. However, your lender is likely to be more motivated to work with you. With Chapter 7 bankruptcy, your debt is discharged, which means the lender is likely to get less if you go through with the bankruptcy. If you choose not to recover your vehicle, the loan deficiency will become part of your bankruptcy, which means it may be discharged.