You can surrender your car to the title loan company in your Chapter 13 case. Even if the company receives less than one-half of the debt owed when it sells the vehicle, it cannot sue you for the remaining amount owed on the account.įree Chapter 7 Bankruptcy Calculator Chapter 13 and Title LoansĬhapter 13 is a repayment plan. Because you surrender the vehicle in Chapter 7, the title loan company cannot demand more money from you. If you want to get rid of the car, surrender the vehicle to the lender. However, the loan company is not required to work with you, so you could be faced with paying the debt in full or giving up the car. However, you might have more leverage to renegotiate the contract terms so you can pay off the loan quicker and under terms you can afford. The Chapter 7 bankruptcy does not eliminate the title loan company's secured lien on your car. Let’s look at how Chapter 7 and Chapter 13 can help you with a debt on your vehicle. However, if you are struggling to pay other debts, filing for bankruptcy relief could be your best option. File Bankruptcy to Get Out of a Title Loanįiling bankruptcy might seem like a drastic way to get out of a title loan. However, voluntary repossession has pros and cons to consider before opting for this solution. You might consider a voluntary repossession instead of allowing the title loan company to initiate an involuntary bankruptcy. Third, the lender could sue you for a deficiency judgment, which could result in wage garnishments and other collection efforts. However, defaulting on a loan has consequences. If any money remains after the title loan amount and costs are paid, the company should give you that amount. You have the right to receive a full accounting of the auction proceeds. Your car is sold at auction to repay the debt. If you stop making payments, the company eventually repossesses the vehicle. In some cases, you could also find a lower interest rate, which reduces the total amount you pay for the debt.īefore you refinance or consolidate debt, use our free debt consolidation tool to determine if this is the best option for dealing with a title loan you cannot afford to pay. However, some options could reduce the monthly amount you pay toward debt payments. Refinancing and consolidating loans do not get rid of the debt. Generally, written-off debt is reported to the IRS, and you might need to include that amount as income on your tax returns. However, if the company agrees to accept less than you owe to pay off the loan, it could impact your taxes. The company understands that if it repossesses the vehicle, it is still a loss. This option might work if the car is worth less than you owe to the title loan company. If you cannot pay the amount in full, the lender might agree to take a lump sum payment. You might be able to get out of the loan by making a debt settlement offer. Sometimes, the company might agree to lower the interest rate or make other changes to lower your monthly payments. The lender might be willing to accept the offer instead of repossessing the vehicle. Make an offer of what you can afford to pay. If you have trouble making a payment, ask the company if it will work with you to renegotiate the loan terms. If you can pay the account in full, call the title loan company to ask for a payoff amount and payoff instructions. Friends and family members might be able to help you get out of a title loan so you can get back on your fee. When you pay off a title loan, the company releases the title. Of course, the best way to get out of a title loan is to pay off the account. However, if you find yourself in this situation, below are five options you might want to consider. It is best to try to avoid title loans whenever possible. Instead, after you miss one payment, a repo company might show up at your home to take your car. Unlike other lenders, the title loan company may not call or write you a letter asking for payment. The loan company can repossess your vehicle if you do not make the payments. A loan on your car is a secured lien on your vehicle. Most of the payment is interest, so the total you owe on the car loan decreases a small amount with each payment.Īnother disadvantage of a loan on your car is you risk losing your vehicle. These loans typically have high interest rates, so you pay very little each month toward the loan payoff. However, they are expensive and it can be challenging to get out of a title loan. Car title loans can be a quick, easy source of cash when you have a financial crisis.
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