People who are swimming in debt might have trouble making payments on secured assets, such as a vehicle or home. It is imperative that you decide how you will handle this situation as soon as you realize you won’t be able to keep up with the payments. Your first line of defense might be contacting the lender to see what you can work out. During this meeting, be sure that you don’t make any payment arrangements that you can’t keep.
If you aren’t able to work something out with the lender, you might consider bankruptcy to try to prevent repossession. This requires that you take a hard look at your financial situation to determine what you need to do. There are two primary options in a personal bankruptcy. You can file for a Chapter 7, which is the liquidation bankruptcy and doesn’t require you to make payments. You might qualify for a Chapter 13, which requires you to make regular payments to the bankruptcy trustee.
Both options provide temporary relief
Both of those personal bankruptcy options can provide relief from repossession and collection attempts at least in the short-term period. The automatic stay that is issued when you file prevents creditors from being able to try to get their money or assets back. They will be notified of the automatic stay, but they can file a legal motion to ask the court for relief from the automatic stay. If it is granted, they can start the repossession again.
If your creditor files a motion for relief, you will be able to fight that. This is going to be difficult and it won’t buy you much time. The court date for these matters is usually set within 30 days or somewhere close to that.
Keeping the assets
There is a chance that the bankruptcy will enable you to keep the asset. You might be able to redeem the asset by paying only the cash value. This could save you a considerable sum if you are underwater in it, such as what might happen to a car. In a Chapter 13, the lender might be more willing to work with you to allow you to keep it and get caught up on your payments.
There are a lot of other factors that must go into your decision to file bankruptcy. When you are thinking about the matter, be sure that you look at the short-term and long-term impacts that the options might have on your life.