In today's economic climate, many Birmingham residents are facing financial difficulties and are unable to make all their monthly payments to their creditors. It's important to know that secured lenders have special rights to their collateral should they miss payments on a loan. For example, if a lender defaults on a car loan, eventually the lender will have the vehicle repossessed.
Following repossession, the car will be sold at auction. In many cases, the car does not sell for what is owed on the loan and a deficiency balance remains. The lender will be looking to you to pay the remaining balance on the loan. Fees such as towing, storage and attorney's fees may also be included in this amount.
So what are your options if you are in this situation? You could try to contact the lender to work out a repayment plan, but often times this is not a possibility because the deficiency balance is so high. If you take no action, there is a good chance the lender will file a lawsuit against you to collect the balance. In this case, you would be facing potential wage garnishment or asset seizure to satisfy the judgment.
Personal bankruptcy is often the best option for people who owe a deficiency balance following the repossession of a car or truck. The instant your bankruptcy case is filed, you will be protected by the automatic stay from further creditor collection attempts. At the end of your bankruptcy, you will get a discharge of any remaining obligation on the auto loan, as well as your other dischargeable debt. This is true in both Chapter 7 and Chapter 13 bankruptcy. An experienced Alabama bankruptcy attorney can assist you in determining whether bankruptcy filing is advisable for your particular situation.
Source: Fox Business, "Lender wants loan balance for repossessed car," Tara Baukus Mello, Dec. 7, 2012