Repossession can be a very scary process and can also happen pretty quickly.
In New York State, when a borrower has defaulted on a car loan, the creditor has the right to repossess your car even if you are only a few weeks behind. And to do so, the creditor does not even need permission from the court to pick up the car. The reasoning behind the ability to take a car back without notice is that it is a moveable asset, and if a borrower were given notice of the repossession he or she might hide the car or attempt to damage it.
If you are having temporary difficulties making car payments, stay in touch with your lender. You may also decide not to pay credit card, medical bills, or other low priority debts to keep the car payments current. Not paying low priority debts for several months will have little consequence; however, if you miss a couple car payments, the car will likely be repossessed. If your car is repossessed, you may be unable to get to work, which will in turn make it difficult to pay any of your bills.
Your car lender may be willing to negotiate an arrangement to temporarily lower payments or add the missed payments on to the end of the term, but, again, you must maintain contact with the lender.
Can I get the car back?
If the car is repossessed, you may seek to reinstate your contract by paying all of the past due payments. If the contract is not reinstated, the lender will likely look to sell the vehicle at auction. In New York State, if you have paid more than 60% of the loan when the car is repossessed, the lender must auction the vehicle within 90 days.
If the car is auctioned, the lender will apply the funds first to any repossession or storage fees and expenses and then to the balance owing on the loan. If the amount recovered at auction is insufficient to pay the loan in full, the lender can look to sue you for the balance remaining, called the deficiency.
If you have had a repossession, or repossession is imminent, filing bankruptcy may be an option to assist you with resolving the resulting financial mess.
With a deficiency balance, you may be able to file Chapter 7 or Chapter 13 bankruptcy and either discharge that balance or repay it at a percentage on the dollar. If instead you are looking to save a vehicle, bankruptcy will at least afford you the benefit of the automatic stay for a short time and may allow you the opportunity to pay arrears through a Chapter 13 plan. To determine if any of these options are available to you, it is best to meet with a knowledgeable bankruptcy attorney, such as one of the attorneys at Jeffrey Freedman Attorneys, PLLC.