By: Darrell Castle
When you don’t make your car payments, the bank can threaten to come and take your car away. And eventually, they will if the debt isn’t handled.
You can do one of two things when you find yourself in that situation.
1. You can try to stop the car repossession by filing for bankruptcy.
2. You can allow the car to be repossessed.
Let’s talk about option 2. Why would someone let their car be repossessed?
Some people realize they just flat out can’t afford to make the payments on their car. So instead of playing a cat and mouse game of constantly trying to avoid a repo, they go ahead and surrender it in order to downsize to something they can afford.
But just because you choose to surrender your vehicle — and its payments — doesn’t necessarily mean you won’t owe anymore money on it. Actually, you probably WILL owe money.
What’s a Deficiency Balance?
When your car is repossessed, it’s then turned around and sold in auction — typically to an auto dealer. And it’s usually sold for less than you actually owed on the car. The remaining balance is called the “deficiency balance.” And you’ll be responsible for paying that.
I talk more about that in this video:
What Bankruptcy Can Do For You
You can either pay that balance. Or if you can’t afford to pay it, you can get rid of that balance by filing for Chapter 7 bankruptcy.
A Chapter 7 bankruptcy is often referred to as a “straight bankruptcy.” It can wipe away your unsecured debt — or debt that’s not backed by collateral — in a relatively short amount of time. And you don’t have to make any payments towards your debt.
You can also include your deficiency balance in a Chapter 13 debt repayment plan, in which you’ll make small AFFORDABLE payments on your debt for a 3-5 year period.
And of course, Chapter 13 bankruptcy can also help you stop your car repossession. You can learn more about that here.
Want a free bankruptcy consultation?
If you’re struggling financially and want to talk to an experienced bankruptcy attorney about your options, then our FREE consultation is perfect for you.
For decades, the attorneys at Darrell Castle & Associates have helped people in Memphis and the Mid-South get rid of debt they can’t pay. And we want to help you too!
We’re detailed, informative and really care. We’re good at what we do, and our clients will tell you that.
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