If you have found that you are unable to keep up with your car payments, you are not alone. In fact, statistics show that 7 million Americans are one to three months behind on their car payments.

So, What Happens When You Can’t Pay On Time?

Well, this will largely depend on your loan documents and your credit history. However, typically when you fall 30 or more days behind on your car payments, you will begin to be contacted by your lender. This will likely begin with phone calls and letters. The longer you fall behind, the more likely it is that your car will be repossessed.

A repossession will damage your credit score and you may still owe money on the car. If the repossessed car sells for less than what you owe on it, you are responsible for paying the difference. You should also know that additional costs will be added to this amount.

What Are Your Options?

Contact Lender:

You should first try contacting your lender to let them know that you will be unable to make payments. You may be able to work something out to get you back on track with your payments and avoid repossession.

Sell Your Car:

If you are able to get by without your car, you can avoid repossession by selling the car on your own. You will need to know exactly how much you owe on the loan. You can request this payoff amount from your lender. Next, make sure you find out the market value for your car. In some cases, you may not be able to sell your car for the amount owed. If this is the case, talk to your lender to see if they will forgive the remaining balance to avoid repossession.

Surrender Your Car:

First, tell your lender that you will not be continuing payments and that you want to surrender your car. A time and place is set to turn over the car and keys. The lender sell your vehicle. Sometimes, the vehicle does not sell for the full amount of your balance. If this occurs, you run the risk of owing more money.


Bankruptcy will offer you options for keeping your car, no matter the chapter under which you file. In a Chapter 7, you have the ability to redeem or reaffirm your car loan. A reaffirmation agreement allows you to enter into a new contract with your existing lender, which is kept out of your bankruptcy. 

Redemption allows you to wipe out an existing loan by paying off the value in a lump sum. This does not apply for real estate like your home. Redemption is a good option when your car is worth a lot less than the balance of your loan. 

Chapter 13 will provide you the option of a “cramdown” loan. When your car is worth less than what you owe or you are paying too much in interest, you have the option of cramming down your car loan. Benefits include reducing your balance, cutting interest rates, and reducing your payment. To use, you must file for Chapter 13 bankruptcy and have owned your car for more than 910 days. In your plan, you can propose to pay the lender only the value of the car instead of your entire balance.

Need More Information?

At the Law Office of Daniela Romero, we believe in relationships that are based on trust. Before we work together, we would like to get to know you and we would like you to get to know us. We want you to be sure you are the right fit for us and that we are the perfect fit for you. This will allow you to be completely comfortable sharing intimate and difficult details of your case, so we can offer you representation to the fullest extent of the law. Call us today to set up a free consultation.