How Can an Illinois Bankruptcy Help Me Keep My Car?

The number of seriously-delinquent auto loans in the United States recently hit a 10-year high. Approximately seven million vehicle owners are at least 90 days behind on payments. This figure does not include the number of 30 and 60-day delinquencies. In most states, including Illinois, lenders may repossess the collateral after just one or two missed payments.

When consumers fall behind on payments and creditors come looking for the money, the Fair Debt Collection Practices Act used to protect these consumers. But that may no longer be the case, because the Supreme Court has repeatedly diluted this law in recent years. So, Chapter 13 bankruptcy may be the best option in these situations.

Chapter 13 is not just an emergency fallback. This federal law helps vehicle owners in ways that the FDCPA could not do even in its heyday.

Short-Term Assistance

In most cases, bankruptcy’s Automatic Stay stops repossession proceedings in their tracks. Under Section 362 of the Bankruptcy Code, it is illegal for creditors to communicate with debtors in bankruptcy. That communication includes adverse action, like lawsuits, repossession, and foreclosure. Typically, the Automatic Stay remains in effect throughout the protected repayment period.

Chapter 13 gives debtors up to five years to catch up on past due secured debt, like vehicle loans. So, if you are three $500 payments behind, bankruptcy lets you repay the debt for as little as $25 a month. Try finding a deal like that anywhere else.

One final note on this point. Debtors should not wait until they are three payments behind to file bankruptcy. As mentioned, the moneylender may repossess the collateral before then. It’s fairly easy to prevent a repossession with bankruptcy. However, it’s almost impossible to undo a repossession through any legal means.

Long-Term Assistance

Procedurally, most Chapter 13 debtors reaffirm their secured debts. The creditor lets the debtor keep the collateral, and the debtor agrees to keep making payments.

The brief reaffirmation agreement does not simply supplement the existing contract. It replaces all terms of the existing contract. So, a reaffirmation agreement is your chance to renegotiate things like interest rate, installment amounts, and principal balance due.

Typically, your attorney, who is a highly skilled negotiator, handles these debt relief talks for you. When they buy vehicles, consumers have very little negotiating leverage. But in bankruptcy, especially if an attorney is in charge, the tables are turned. Moneylenders know that they must make a deal, or the debtor will walk away from the arrangement, leave them holding the bag, and there is nothing they can do about it.

In a Chapter 13, redemption may be an option as well. Redemption lets debtors in bankruptcy pay the collateral’s fair market value and own the item free and clear. Assume Omar owes $15,000 on a car that’s currently worth $7,500. If he pays the current fair market value, the moneylender will release the lien, and Omar will own the vehicle free and clear.

Redemption is a very complex matter that only an experienced bankruptcy attorney should handle.

Connect with Experienced Lawyers

Chapter 13 helps you keep your car, and may also make it more affordable in the long term. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. After hours visits are available.

Resource:

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