Financing a vehicle is a common decision. Even people making competitive wages may not be able to pay in full for a vehicle. Financing the purchase is a reasonable choice, but it does come with a degree of risk.
Specifically, the borrower is vulnerable to repossession if they fail to make loan payments. The lender can physically repossess the vehicle if the borrower does not make their payments. People who lose their jobs or experience other financial challenges may question how long they have to correct the situation before repossession deprives them of transportation.
When is a vehicle vulnerable to repossession efforts?
Every vehicle loan is different
The terms for vehicle loans depend on an individual’s credit and the internal policies of the lender. Some companies that offer vehicle loans are more generous than others. Federal statutes do not impose a minimum number of missed payments or require advance notice before repossession.
People sometimes conflate their rights during foreclosure with their rights during repossession. Companies do not have to notify vehicle owners about impending repossession. There is no minimum number of missed payments. Some lenders initiate repossession attempts after a single missed payment.
Others are a bit more flexible. Communication with the lender after a missed payment can sometimes help temporarily delay repossession attempts. A bankruptcy filing can also prevent repossession. Creditors generally cannot continue collection efforts while an automatic stay is in effect. People worried about the loss of their vehicles may need to consider filing for bankruptcy before repossession occurs
Preserving accumulated equity and financed assets is one of the most common reasons that individuals decide to file for personal bankruptcy. A successful bankruptcy can prevent immediate vehicle repossession and limit the risk of a filer facing repossession in the future.
