Are you struggling with your car loan or overwhelmed by your car payments? Maybe you’ve stopped making payments altogether. You are not alone. Household debt has climbed to $15.84 trillion and auto loans have increased by $11 billion on their own. So, what can cause your car to be repossessed?

 Common Factors for Defaulted Loans

According to an article from Barrons, there are common characteristics in defaulted loans that can result in your car being repossessed:

  • The loans for repossessed cars began in 2020 or 2021
  • There has been an increase in the loan-to-value ratio of the vehicles.
  • Loans were granted to individuals due to temporary income increases due to the pandemic, so when income fell and stimulus payments ended, people were unable to keep up with payments.
  • Inflation is rising, which is making people’s income not go as far as before. 

So, are you wondering if you have other options? Good news! You have options.


Bankruptcy is a viable option to reduce or eliminate your debt entirely. This can help you protect your car or come up with a better payment plan. When you file for bankruptcy an automatic stay helps protect you from creditors. This is a court-ordered injunction. It prevents creditors from seeking legal action against you after filing for bankruptcy. Without the filing, creditors can contact you by mail, phone, text, and so on. Consequently, you may be overwhelmed if you are having difficulty repaying your debts. After your filing, your creditors must stop all communication with you. Now, they will send any inquiries to your attorney instead. This can be particularly helpful if you have a pending foreclosure, wage garnishment, car repossession, or eviction. 


You also have the option of surrendering your vehicle. This is a voluntary process in which you tell your lender that you will not be continuing payments and that you want to surrender your car. You and the lender set a time and place to bring the car and surrender the keys. The lender will in turn sell your vehicle. In the event the vehicle does not sell for the full amount of your balance, you run the risk of owing more money.


In a Chapter 7 bankruptcy, redemption allows you to wipe out an existing loan by paying off the value in a lump sum. This does not apply for your home or other types of real estate. Redemption is a good option when your car is worth a lot less than the balance of your loan. This can be difficult if you do not have enough money to pay the agreed upon lump sum.


A reaffirmation allows you to enter into a new contract with your existing lender. This will be kept out of your bankruptcy. This means that you will agree to continue paying back the lender as if you had not filed for bankruptcy. However, if you do not keep up with payments, your vehicle can be taken, sold, and you can be billed for any remaining balance that is owed.

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 through a Chapter 13 bankruptcy. This can reduce your balance, cut interest rates, and reduce your payment. In order to take advantage of a cramdown loan, 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.