Repo Man Chasing You? How to Handle a Serious Auto Loan Delinquency

If you are struggling to pay your auto loan debt, you are not alone. According to the New York Federal Reserve, more than 7 million people in America are seriously delinquent on their auto loan debt through the end of 2018. A serious delinquency is defined as being at least 90 days past due on the loan.

Subprime Lenders, High-Risk Borrowers

People under age 30 saw the sharpest rise in delinquencies while those over age 30 saw their delinquencies rise more slowly. The rise in delinquencies may be due to the presence of subprime auto lenders in the market. These subprime lenders typically lend to higher risk borrowers. Interestingly, the number of people who were seriously delinquent through the end of 2018 is about 1 million more people than at the height of the Great Recession about a decade ago.

The Fed report also noted a sharp rise in total auto loan debt. According to the report, there has been a $584 billion increase in total auto loan debt. The total auto loan debt is now $1.27 trillion. About 6.5 percent of the total debt was past due by the end of 2018. The amount of seriously delinquent debt rose from 1.5 percent in 2012 to 2.4 percent in 2018.

So I Have 90 Days to Get Current?

There is a common misconception that a lender will not attempt to repossess an automobile until the delinquency in payments on that auto debt equals or exceeds 90 days. This is not true. Generally, an auto lender can repossess an automobile when a “default” in payment occurs. The exact point in time when a default occurs is usually defined in the auto loan documents.

Frequently, I counsel with clients who literally are being chased by a repossession agent. These circumstances necessitate quick and decisive action if the vehicle is to be saved.

How Chapter 13 Bankruptcy Can Help

One very effective way to prevent a repossession is to file a Chapter 13 debt consolidation case. Immediately upon filing, all creditors of the debtor are usually stayed from all collection actions, including repossession. This means my client can keep his/her car while paying the auto loan debt through a Chapter 13 plan.

Even if your car is repossessed before you file a Chapter 13 case, you can still get it back in Mississippi and in some other jurisdictions. Generally, the delinquent loan must be scheduled to be paid through the client’s Chapter 13 debt consolidation case.

Further, you must provide proof of insurance coverage to recover the repossessed car. This action is not available in all states and, if your car is sold at an auction after it is repossessed, it generally cannot be recovered.

Contact a Bankruptcy Attorney Today for Help

If you are seriously delinquent on your auto loan, get competent advice from an attorney knowledgeable in consumer bankruptcy law. Our attorneys offer free initial consultations to individuals struggling with overwhelming debt. Don’t wait until it’s too late.