Legal Services by Randall A Fischer

Can I keep my car if I file for Bankruptcy?

If the Bank repossesses my car, do I still owe any money?

The short answer to this question is: it depends. When the vehicle was originally purchased via a loan, the purchaser enters into a security agreement and a promise to repay the loan. The security agreement covers the vehicle in the event of a breach. The lender, in the event of a breach, can exercise options contained within the agreement to satisfy the security agreement. For example, if you do not make your payment, the lender can repossess your car. There may be other grounds for repossession contained within the security agreement so it is important to read all documents before signing anything.

The issue of whether or not you will still owe the lender money is contingent upon the money owed on the account versus monies received for the sale of the vehicle. The repossessed vehicles are usually auctioned. The money received is applied toward the balance due on the promissory note. In the event the amount exceeds the balance due and any costs associated with the repossession (as agreed upon in the security agreement), then the owner would be entitled to the balance. Otherwise, there is a shortfall also known as a deficiency. The lender can sue the borrower for this deficiency as well as for any expenses associated with nonpayment as detailed in the note. This is why it is important to read everything before signing.

Is there any way to avoid this potential situation? One possible solution would be to contact the lender prior to repossession. If you are facing a short term cash flow short fall, contact your lender and see if they are willing to allow for an interest only payment schedule until you are able to get back on your feet. If you are unable to make those payments, contact the lender and see if they would be willing to waive any deficiency in lieu of your cooperation. Understand, the lender does not have to do anything, but it doesn’t hurt to try. Second, any amounts forgiven could be subject to a 1099 for the lender and realized as taxable income.

If the potential deficiency is quite large and you have other pressing financial situations, you should contact Jupiter FL Lawyer, a bankruptcy lawyer and review your options.

Our Services

My Law offices are located in Stuart, Port St. Lucie and Jupiter Florida. Call for a free consultation.

Hours of Operation

Mon-Thur: 8:30-5:00 pm

Fri: 8:30-3:00 pm

Law Offices of Randall A. Fischer, P.A.

I hope you will take the opportunity to explore my website.