If you’ve fallen a couple of months behind on your car payments, chances are the bank will be asking for payment. If they are willing to offer you a payment plan and agree not to repossess your vehicle, then you may want to accept that. If, however, the bank is no longer willing to work with you on a repayment arrangement and you really need the vehicle, then you should consider filing for bankruptcy.
The bankruptcy will put an automatic stay on collection activities, which means that the auto lender will no longer be allowed to contact you—regardless of how far behind you are on payments. In addition, they will be barred from repossessing your vehicle while you are under bankruptcy protection, which for a Chapter 7 bankruptcy usually lasts three or four months. You may be able to catch up on the arrears and make the payments on the auto loan by the time you obtain the reaffirmation agreement, which is an agreement that says you want to keep your vehicle.
If you decide that you would rather surrender the vehicle, then you can voluntarily relinquish it and it will be repossessed, but the debt on the vehicle will not disappear. For example, if you voluntarily relinquish the vehicle while there is still a balance of $10,000, then the auto lender would continue to request payment, and if you don’t make payments, they could sue you. Clients commonly come to us when they are being sued for a car that was repossessed or that they voluntarily relinquished, and many of these clients are very confused because they assumed that by returning the vehicle, the debt would be erased. Unfortunately, without filing for bankruptcy, this debt will not go away.
My Family Is Living Off Of Credit Cards Right Now Due To Unemployment During The COVID-19 Outbreak. If We File For Bankruptcy Now, Will The Recent Debt Still Be Forgiven?
Living off of credit cards is something that I think the majority of Americans do, and for many people, it’s what’s required during these tough times. Many people are turning to their credit cards for basic necessities, like rent, food, and utilities. As of right now, there’s no mention of forgiving the debts that are being incurred as a result of the COVID-19 pandemic. Short of any legislation to the contrary, the only way to resolve this type of debt is through bankruptcy.
Many people feel that this is unfair, and I can’t disagree. However, if there is no other way to pay the debt, the best alternative is to file for bankruptcy. Since the debt would be for items of necessity rather than luxury, there would be no problem getting it discharged through bankruptcy and getting a fresh start. I often remind my clients that bankruptcy is not a fad; it was born out of Article I of the Constitution as a way to give indebted people the opportunity for a fresh start. Bankruptcy is our Constitutional right, and it’s what makes us American.
Individuals who choose not to file for bankruptcy spend years trying to pay off their debt, all while interest is accruing. Many people who choose this route simply never have the ability to pay off their debt. Those who choose bankruptcy enjoy a complete discharge of their debt within three months. While bankruptcy will result in an initial credit score drop, it can increase by up to 150 points within a year. In fact, if two people have the same credit score and only one files for bankruptcy, the one who files will likely end up with a better credit score than the one who doesn’t.
Should I Let My Debt Get Worse During The COVID-19 Crisis And Continue Missing Monthly Payments, Or Should I File Bankruptcy Now?
It is up to you to decide whether you want to file for bankruptcy right away, or take some time to think about it. In the meantime, if you need to continue incurring debt in order to pay for necessities such as food and shelter, then continue doing so; this will not prevent you from qualifying for bankruptcy. Some people choose to file bankruptcy before they even miss a single payment because they know that bankruptcy is imminent and want to avoid the stress of constantly being contacted by collectors.
Instead Of Filing For Bankruptcy Due To The COVID-19 Outbreak And Unemployment, Should I Apply For Loans Or New Credit Cards To Stay Afloat Until This Is All Over?
Bankruptcy usually is the last option, so if there is still credit available to you, I would recommend getting it. Unfortunately for many people—even those who had good credit—it’s going to be increasingly difficult to obtain new credit because many lenders are tightening their requirements due to the pandemic. If you find that you can’t obtain new credit, bankruptcy truly is the best way to get back on your feet and have a fresh start. If you do obtain new credit but find yourself in a worse situation a few months down the line, bankruptcy will still be an option for you.
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