Borrowing money to purchase a car requires a signed contract that essentially provides the bank a security interest in the vehicle, which also serves as collateral that secures the loan. Not making payments over a certain amount of time can result in that collateral being taken away.
The discovery of a car repossessed is an unsettling moment. However, under certain circumstances, financial companies taking your vehicle for nonpayment does not mean that you automatically lose it permanently.
Florida’s statute of limitations for car repossessions and all consumer debts with written agreements is five years following the last date of activity on the loan. Simply put, the lender cannot collect or file a lawsuit.
Chapters 7 and 13 bankruptcy
Many consumers turn to Chapter 7 bankruptcy to stop the repossession of their vehicles. Filing results in an automatic stay that provides the time you need to negotiate new payments that are more affordable and potentially prevent a second repossession. If the car was subsequently sold, you may secure a deficiency judgment.
Reinstating the loan requires you to bring it current and cover towing, storage, and legal fees. The step is not for everyone. The initial contract must have a reinstatement clause, and limitations may exist regarding the number of times you can exercise those rights.
With a Chapter 13 filing, you can also stop a sale of your car through a Chapter 13 filing and have the option of reorganizing your motor vehicle debt and spreading out late payments over many years.
With all these available options, it is essential to note that bankruptcy is, at best, a temporary solution to much more significant financial problems.