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Behind on Car Payments: What You Can Do About It

If you are behind on car payments, you are not alone.  America is now reaching record levels of consumers behind on car payments.   What should you do if you find yourself behind on car payments?   This article discusses why consumers are behind on car payments and what you can do about it.

Automobile Lending is Based on Profit, Not People

Automobile lenders as a whole use various forms of statistics to determine how many U.S. car loans should be generated each year.  These statistics are based upon maximum profit projections. These automobile loans do not have the consumer’s best interests at heart.   Instead, the focus is on profit.    Therefore, thousands of automobile loans are generated each year that may spell economic doom for the purchaser.   If the purchaser defaults after thousands of dollars in payments (going mostly to interest payments), it’s of no concern to the lender.  The lender will repossess the automobile, sell it, and then slap a massive deficiency judgment on the purchaser.

Therefore, whenever you seek to purchase an automobile on credit, you need to be fully aware of the dangers.  The automobile sellers and lender are seeking a profit at your expense.  You need to always start at this point of understanding: it’s all about auto-sellers profit at your expense.

Behind on Car Payments: What Are My Options?

Multiple options are available when you are behind on car payments.  First, you usually have 2-3 months before the lender repossesses the vehicle.  During this time, you can usually cure the deficiency without much trouble from the lender.   Some lenders also give “grace” periods or even a limited amount of “deferments” for a monthly payment.   Some buy-here-pay-here lenders are more strict however: they will not give any payment “graces” and sometimes repossess after 30 days of being late or less.

Secondly, you may be able to settle your obligations to your automobile lender, at least eventually.  If your automobile is behind in payments, it will eventually be repossessed and then sold a short time later.  From that point, you will be responsible legally to pay any “deficiency” after the sale. These deficiency amounts vary based on the circumstances, but can sometimes be even in excess frequently of $10,000.   The automobile lender may take much less than your “deficiency” amount in settlement just to get the loan “off their books.”

Third, you can file either Chapter 7 or Chapter 13 bankruptcy when you are behind on automobile payments.   Chapter 7 mainly only erases your debts.   In Chapter 7, generally you would be forced to make payment arrangements and keep paying on the vehicle if you desire to keep it.

Chapter 13, however, has much more powerful options in dealing with a behind-on-car-payments situation.   Chapter 13 can “reorganize your debt” and you can pay the automobile through the Chapter 13 plan at low interest.  Sometimes the automobile payments can also be much lowered in Chapter 13.   Chapter 13 also can even force your automobile lender to return a repossessed automobile if it was only recently repossessed and has not yet been sold.

The “Best” Thing You Can Do About Being Behind on Automobile Payments

By far, the best thing you can do to prevent being behind on automobile payments is simple: never buy financed cars.   Completely avoid the auto-lending market by saving to purchase paid-in-full automobiles.  Take advantage of various learning opportunities to learn how to purchase and maintain an automobile more affordably.   Buy multiple affordable vehicles: then you’ll never be forced to make a poor “quick” purchase.  If you are always “under the gun” to purchase an automobile, you will always come away with a horrible deal.   Make the wise purchasing of automobiles one of your top financial goals.