I Can’t Afford My Car Payment!

8567864994_eab342aebdImage courtesy of Rachel Titiriga

Purchasing a new vehicle is a very exciting event for anyone. For most, it is a decision that’s made after months and months of planning, saving and waiting for just the right deal. Even so, every year there are a number of consumers who have realized only in hindsight that they really cannot afford a new car.

The reasons for this include but are not limited to: job loss, demotions, divorce, surprise or emergency expenses, unexpected medical conditions, the decision to buy a home or other changes in life circumstances. Whatever the reason(s), the realization that you can no longer afford to make your car payment can be overwhelming and scary. If you’ve found yourself in this position – you do have a few options, but you may not know which one will give you the best results.

Should you stop making your car payments? Giving your car back to the dealership and not owing them any money would be ideal. Unfortunately, it’s just not that simple. Once you have agreed to purchase the car and have signed your name to a loan agreement, you are legally obligated to keep the loan current. Returning the vehicle to the dealer or lender is an option; however, the act will be reported to credit agencies as a repossession and will put a black mark on your credit report. The car will be sold for much less than you owe on the loan, with you left holding the bag for the difference.

If the deficiency (the amount still owed on the vehicle) isn’t paid, the lender will likely sue you for the money. If you feel that surrendering the vehicle to the lender is your best bet, attempt to work with the lender ahead of time to arrange for a reduction or complete waiver of the deficiency amount. Otherwise, you’ll end up with a repossession on your credit report, a lawsuit against you, and you’ll still owe money on the car that you no longer have.

Should you trade in the car for something less expensive? Communicating with the dealership about your difficulty with the payments may work in your favor. All dealers want your business and loyalty. Explain that you had a significant change of circumstance and asked to trade in your current vehicle for something less expensive. Another similar option would be to work with your lender or dealership to refinance the life of the loan or the interest-rate on the car you currently have – potentially lowering your monthly payments into a range that is affordable.

Should you sell the car yourself?  This is a good solution if you can manage to sell your vehicle for at least the amount that you still owe on the loan. This would allow you to pay off the loan and hopefully purchase a much less expensive pre-owned vehicle, or to look into the public transportation options in your area.

Should you file for bankruptcy? By surrendering your vehicle in a Chapter 7 bankruptcy, you would be able to forfeit any and all responsibility for the deficiency amount. This is the only solution that will absolve you of paying for the loan and any deficiency after it is re-sold. There will be a mark on your credit, but unlike some other options, you won’t be making anymore payments.

The most important thing to remember when making a significant decision such as this, is to speak with a reputable New Jersey bankruptcy lawyer, especially if you are seriously considering filing for bankruptcy. Hiring an experienced bankruptcy attorney will pay for itself with the money you’ll save once your debts are discharged. He’ll also show you how to get your finances back on track and how to keep them that way.

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2 Responses to I Can’t Afford My Car Payment!

  1. Pingback: My Car was Repossessed: Can I Get it Back? | Veitengruber Law

  2. Pingback: Have Your Wages Been Garnished? You Have Options. | Veitengruber Law

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