If you are having difficulty paying off your debts and additionally have a car title loan that you need to pay for, there are different ways that you could take advantage of the law so that you can avoid losing your car.
If you have a lot of debt that you cannot manage to pay off, filing for bankruptcy may be one option in order to get relief from your debts, including your car title loan.
For example, car title loans in San Jose, California usually afford you the flexibility to renegotiate the terms of your car title loan albeit usually at a cost, but the cost may be worth it if it gives you a little more time to make payments to get back the lien for your car.
Below are some of the considerations that you will have to make in order to keep your car after taking a car title loan on and declaring bankruptcy.
How collateral on a car title loan is treated in chapter 7 bankruptcy
When you take up a car title loan, the value of your car is used as the collateral for the loan. This means that if you do not pay your loan as you should, your car will be used to recover the value of the loan that has been unpaid.
With chapter 7 bankruptcy, while you will be released from most of your other unsecured debts, you will not be released from secured debts like car title loans. This means that you will have to find another way to pay for the car title loan in order to keep possession of your car.
Redeeming the car
If you file for chapter 7 bankruptcy, another option that you have is to “redeem” your vehicle. This means that you have the option to pay for the full present value of the car in order to take back lien or possession of your car.
While paying for the value of the vehicle in one lump sum may be difficult for most people, it will be beneficial to you.
For example, if the present value of your car is $10,000 and your car title loan has accumulated interest to a value of $13,000, if you pay $10,000 all at once, you will get to keep possession of your car.
That way, you will save some money and avoid losing your car at the same time.
Paying for your car title loan in installments through filing chapter 13 bankruptcy
If you file for chapter 13 bankruptcy, and manage to “redeem” your car as in point 2 above, you will be allowed to pay for the present value of the car in installments for as long as 5 years and still manage to keep possession of the car.
Negotiate with your car title loan lender after filing for bankruptcy
Negotiating for debt relief with your car title loan lender after filing for bankruptcy is another option that you have, if you want to keep possession of your car. You could be forgiven for part of the car title loan, or be given an extended period over which you can affordably pay back the car title loan and keep possession of your car.
Car Towed photo by Emran Kassim. License: CC BY 2.0.