Blog > 2021 > October > How To Fix A Bad Car Loan
For some people, it might be challenging to get a car loan or lease, so they’re forced to settle with a high interest rate. Suppose you have financial problems because you lost a job or had an unexpected medical emergency; you can sometimes renegotiate the terms of your car loan or lease. However, some finance companies are not willing to renegotiate the terms. The information provided will answer how to fix a bad car loan through bankruptcy. You could file Chapter 7 or Chapter 13. An Encino CA attorney can help you determine which is best for your situation.
Chapter 7 bankruptcy is liquidation, which means that the trustee recovers property you own and sells it to pay your bills. Often, these creditors get dimes on the dollar. However, the last thing a finance company wants is to hold onto is a used car. Once you file for Chapter 7, the finance company could re-think its position. A lower interest rate, refinancing for a longer term, and other changes to the terms of your lease or loan are better than losing all of the interest.
Even if you have other creditors you are keeping up with; you might need to file Chapter 7. However, if you have not been late on any payments but are struggling, you might try to renegotiate with another creditor to save your credit rating. If your credit has already taken a hit or two, you could file Chapter 7, even if it’s only the car loan that is causing a short budget.
If you have many assets, especially equity in your home, you could lose your home if you file Chapter 7. You could, however, file Chapter 13 reorganization. However, the car loan or lease finance company might not be as “willing” to renegotiate with you if you file Chapter 13. Unlike Chapter 7, where the bankruptcy court liquidates your assets, the trustee helps you reorganize if you file Chapter 13. Thus, a car loan creditor might not be as willing to renegotiate since you can keep more property, including your car, under Chapter 13.
Additionally, when you file Chapter 13, you pay the trustee a monthly fee. The trustee pays your creditors, including your car finance company, some of that money each month. If you file Chapter 13, the car finance company knows it will recover the arrearage on your account.
If you need help with a bad car lease or lousy car loan, or if you are having other financial trouble, contact a bankruptcy attorney at SM Law Group in Encino, CA, for a consultation to learn more about your rights.
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