Speak With an Attorney About Filing Bankruptcy if You Are Facing a Repossession

As a local attorney, we help families to get out from under debt by taking them through the bankruptcy process.  Very often, this is triggered by a repossession action.  Cars are integral to our daily life and activities.  The ability to drive to and from work, take the kids to school, go buy groceries, etc. is part of daily life, and most people cannot imagine going without that option.  Unfortunately, for those facing financial difficulty, making the car payment may no longer be an option.  Some banks or lenders will work with you while many are notorious for harassment and moving to repossession quickly.  You will know which one you are dealing with based on their tone during phone calls and if they send you a letter with threats.  If you feel that a lender is escalating the situation and you need to keep your car, you may want to file for bankruptcy.

Most people that have difficulty making their car payment have other debts as well such as credit cards and personal loans.  Given how easy it is to access credit, when financial hardship strikes the natural inclination is to use a credit card and maintain life as usual.  This works when the financial situation improves in relatively short order.  However, for millions of Americans the economy got bad and things never fully got better – leaving many households with a mountain of debt.  Over time, it can be difficult to continue meeting obligations once they have reached an overwhelming level.  The car getting repossessed may just be the tipping point, and we recommend seeking help before you get there. 

When you meet with our attorney office to discuss filing bankruptcy, we will review both the secured and unsecured debts that you have.  Typically, unsecured debts are fairly easy to deal with in a bankruptcy filing because there are no assets that can be repossessed by not making the payments.  Secured debts, like an auto loan, can be far more complicated.  Filing bankruptcy will stop the collection action so at a bare minimum the harassing phone calls will stop, and you can continue to live in your home and drive your car while going through the process.  What happens next, depends on several factors. 

For one, what type of bankruptcy do you want to file?  As an attorney, we can help you to file a Chapter 7 bankruptcy that wipes out all of your debts or a Chapter 13 where a repayment plan is arranged with the creditors and approved by the court.  In a Chapter 7, any secured debts that you have either need to be given back or you need to continue making the payment. In a Chapter 13, you will make one payment that is disbursed amongst your creditors (minus your mortgage) after being approved by a judge.  This payment will be ongoing each month for a period of years and then any remaining debt balances will be wiped out.  We can discuss your options in further detail, including how to save your car, during a consultation. 

Speak With a Bankruptcy Attorney if You Plan to Buy a House in the Future

As a bankruptcy attorney, we hear a lot of questions about mortgages. Understandably, people want to know if they will be able to buy a house, refinance, or keep their current home if they file for bankruptcy. While bankruptcy does provide much-needed debt relief, it isn’t for everyone, so it is important to consider what your total financial goals are before pulling the trigger.

Here is what you need to know –

Your credit will be impacted.  When you file for bankruptcy, it will negatively impact your credit score.  However, you must consider what the alternative is.  For example, if you are maxed out on all of your credit cards, have a lot of loans and are making payments late – your credit score is probably already taken a significant dive.  It is common for people that had scores in the 700s to drop into the 500s simply by being overextended and making late payments. If you are in this situation or will be shortly, you’re going to have a lower credit score regardless of whether or not you file for bankruptcy.

You’ll have to rebuild.  As a bankruptcy attorney, we regularly provide clients with suggestions for how to rebuild their credit.  This is an important part of the process.  Once you have filed, you will need to get new credit accounts that you can use and pay on time in order to see improvement in your credit scores.  Most people have to start with a prepaid credit card where you put money on it, use it, and repay it.  While this is borrowing money from yourself, it will start to give you positive credit history again.  Most lenders require three trade lines (credit accounts) showing a good history in order to approve you for a mortgage loan.  Keep this in mind if you want to buy a house in the future so that you can set yourself up for success.

Time heals all wounds (and credit history).  If you wait long enough, the negative effects of filing for bankruptcy will dissipate as long as you have new and positive credit history.  You can ask for the bankruptcy record to be removed from your credit history after seven years though many FHA and VA lenders will give you a mortgage loan two to four years after filing a Chapter 7. Traditional lenders may require a waiting period of four years or more.

Current mortgages.  If you have a home loan now, you can typically stay in your house as long as you continue to make your mortgage payments.  Otherwise, you can discharge this debt but will have to move out.  If you want to stay in your home and refinance your loan, we can help to negotiate with the lender as part of the bankruptcy process, and you may be able to have your payments reduced, at least temporarily.  This may make it possible to make staying in your home affordable. 

To learn more about your mortgage options, call and speak with a bankruptcy attorney.