Can You File for Bankruptcy to Avoid Defaulting on a Car Loan in Pennsylvania

Many people in Pennsylvania are familiar with the practice of determining what bills to pay each month. There is no one reason people find themselves in this type of situation. Losing your car to repossession is a real problem for people struggling to make their monthly payments. Bankruptcy is often seen as the last resort. However, in many cases, filing for bankruptcy before you fall behind on your car payment will help you keep your vehicle.

Bankruptcy is governed by federal law and is a legal proceeding in which an individual or couple struggling to pay their bills can obtain a fresh financial start. The moment you file a bankruptcy petition, your creditors are prohibited from taking any actions against you, including harassing phone calls, lawsuits, and repossessing your car.

At Young, Marr, Mallis & Associates, our Philadelphia bankruptcy attorneys understand that the preparation before filing a bankruptcy case, including deciding on when to file, is often one of the critical components in whether a case will be successful or not. Call (215) 701-6519 to schedule a confidential and free appointment.

Repossession in Pennsylvania After Defaulting on Your Car Loan

Defaulting on a car loan in Pennsylvania often ends in repossession. Every auto finance company has its particular practices in drafting car loan terms and enforcing those terms. A car loan is considered in default when you miss a scheduled payment. Some lenders allow grace periods to cure a default but, once you miss one payment, a lender is in their rights to begin repossession proceedings.

In Pennsylvania, a lender is not permitted to breach the peace when repossessing a vehicle. This means a car cannot be lawfully reclaimed if it is in a garage or behind a locked gate. However, if your vehicle is parked on the street, a driveway, or public parking lot, your lender could repossess it. If there are any personal possessions in the vehicle, the lender must inform the debtor. The license plates should also be returned to the registered owner.

Once a vehicle is repossessed, the lender will usually schedule a sale to recoup the loan balance. The debtor must be given written notice of the sale, including the date, time, and location. If the car is sold for less than is owed, the lender has the right to sue the debtor for the remaining balance. Under Pennsylvania law, you are permitted to redeem your vehicle if you pay the entire balance of your car loan plus any additional repossession and storage fees. If your car has been repossessed, contact our Pennsylvania bankruptcy attorneys.

Avoiding Defaulting On a Car Loan by Filing Chapter 7 Bankruptcy in Pennsylvania

If you default on your car loan, you risk losing your vehicle and being sued for the remaining balance on your loan. At Young, Marr, Mallis & Associates, our West Chester bankruptcy attorneys believe in taking a proactive approach to debt. A typical mistake many people make is waiting too long before acting. Calling a bankruptcy attorney after your car is repossessed is often too late.

Chapter 7 is the most common kind of bankruptcy filed in Pennsylvania. By filing Chapter 7, a qualifying individual or couple could eliminate a substantial part of their debt, especially if it is all unsecured debt, such as credit cards, personal loans, and medical bills. When making your car payment becomes a struggle, it is time to reexamine where your money is going. If you are paying minimum balances on credit cards you are no longer use or are avoiding one bill to pay another, filing for bankruptcy could be a way to ease your situation. If you are able to stop paying credit card debt, personal loans, or medical bills, you could free up enough monthly funds to comfortably pay your car loan.

Chapter 13 and Repossession in Pennsylvania

Unfortunately, many people only address their financial problems after suffering an adverse consequence, such as repossession or foreclosure. If you have already defaulted on your car loan or if your car has been recently repossessed, you should contact one of our Pennsylvania bankruptcy attorneys immediately.

If you are several months behind in your car payments but your lender has yet to repossess your vehicle, you could keep your car by filing a Chapter 13 bankruptcy. It is possible to pay your lender the money you are behind over the next three to five years through your bankruptcy plan. Bankruptcy, in this case, forces your lender to accept a payment plan.

What if your car was already repossessed? Fortunately, by filing for bankruptcy before your lender sells your car, you could have the vehicle returned. You would still have to pay what you are behind, plus any additional charges you incurred, through your bankruptcy plan. However, if you file after the car was sold, then the best you could hope for is discharging the remaining balance due.

The 910-Day Rule for Vehicles in a Pennsylvania Bankruptcy

It is not uncommon to be paying on a loan that is more than a car is worth. Debtors who file Chapter 13 might have the option of cramming their payment down to the value of their vehicle. If you bought your vehicle more than 910 days before filing for bankruptcy, our Delaware County bankruptcy attorneys could attempt to lower the total amount due to the fair market value of your car. For instance, if the balance on your car loan is $10,000 and your vehicle is only worth $6,500, you could pay the lower amount through your bankruptcy plan while discharging the balance as unsecured debt. This option is not available in every case, so it is crucial to review your circumstances with an experienced bankruptcy attorney.

Before Defaulting on Your Car Loan, Contact Our Pennsylvania Bankruptcy Lawyers

For many people, a car is a vital tool. Losing it to repossession would have a long range of consequences. If you believe you are close to defaulting on your car note or already have, contact the experienced Easton bankruptcy lawyers at Young, Marr, Mallis & Associates to review your available options. You might have more than you imagine. To set up a free consultation, call (215) 701-6519.