As we navigate this new reality, our clients are asking us questions about IF they should consider filing a Bankruptcy. We'd like to share some of this information if anyone out there has the same burning question(s).
A recent question: I just bought a new car a few months ago and I was just laid off from my job. What are my options? The short answer is it depends.
If you want to keep the car, you need to contact your lender right away and find out if they have any payment forbearance programs that will allow you to skip some payments. You should also check with your former employer to determine if they have been paying for any insurance on your behalf that might cover this sort of thing. Finally, look over your loan documents and find out if you signed up for any additional coverage that covers payments in the case of job loss.
If you want to return the car, then go ahead and get your personal property out of the vehicle right now. Technically, the repo man can seize your vehicle if you are late at all in your payments. I've seen cars seized for being one day late, so just be prepared to see the vehicle disappear once your lender knows that you don't plan to get caught up on your payments.
After that your vehicle will be taken to an impound lot where it will spend a few days/weeks until it is taken to auction. The fees for the seizure and storage while it is pending auction will be added to your outstanding balance. The vehicle will then be sold at auction, and you can expect that the amount received will come short of your outstanding balance.
That process will take several weeks. Once the vehicle is sold, the account will probably be transferred to a collection agency where they will try informal collection efforts before turning it over to an attorney. Once an attorney elects to sue, it will take at least 20 days to get a judgment after you have been served.
It is only after a judgment that your creditors can take serious action against you, such as garnishment. In our experience, it takes months, and sometimes a year or more from your last payment to a judgment, and so while the process might be scary, it takes a long time before anything serious can happen.
The main thing is to make sure that you budget, plan your finances out, and make strategic decisions about how to apply your resources. When you experience job loss, don't be focused as much on the effect on your credit score as on the necessities, such as rent, food, and basic utilities. Your car is important, but if the payment is too high, it can sink your family finances, and you might be better off eliminating a payment that is causing you to hemorrhage much needed resources.
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