Have you fallen behind on your car loan payments? You are not alone. Did you know that there are options to help you get back on track?

What Happens if I Stop Making Payments?

Typically, when you fall 30 days or more behind on payments, you will be notified by your lender. The notifications will likely come in the mail and via phone calls. Eventually, a your car will be towed by a repossession person. This can create problems and negatively impact your credit score. Also, you may need to pay the remaining balance if the car is sold for less than is owed.

What Are My Options?

You can reach out to your lender to come up with a manageable repayment plan. Or, if you are ready to get a fresh start through bankruptcy. In a Chapter 7, you can surrender your car to your lender, reaffirm the debt, or you can redeem the car for its value.


You also have the option of surrendering your vehicle. 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.


A reaffirmation allows you to enter into a new contract with your existing lender. This is kept out of your bankruptcy. You will agree to continue paying back the existing lender. 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.


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 real estate like your home. Redemption is a good option when your car is worth a lot less than the balance of your loan. However, this can be difficult if you do not have enough money to pay the agreed upon lump sum.

So, How Do You Redeem a Car in Chapter 7?

First, you will need to find out how much your car is worth. This can be done through Kelley Blue Book or NADA Guides. You will next compare how is owed with the actual value of your car. If the value of your car is lower, redemption may be the best option.

Next, speak with your bankruptcy attorney to see if this is a viable option for you in your Chapter 7 case. Then, your attorney will get in contact with your original lender. They will come to an agreement on the value and condition of your car. A motion will be filed by your attorney for the court to approve. This process may vary depending on your state and local laws. However, your attorney will explain this process in greater detail to you.

Remember, the new loan will not be discharged through your bankruptcy. Be sure to make the agreed upon payments! The lender can later repossess the car or force payment by other means when you do not.

Need More Information?

At the Law Office of Daniela Romero, we believe in relationships that are based on trust. So, before we work together, we would like to get to know you. We also would like you to get to know us. We want you to be sure 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.