How to Protect Yourself from Vehicle Repossession In Case of Coronav...

If you have lost your job due to the coronavirus crisis, you are likely in survival mode. Your immediate goal should be to “shelter in place” to protect your health and that of your family. Beyond that, whatever funds you have need to be allocated to food and shelter.

But what about transportation? Is your vehicle at risk of repossession even in a time of national emergency? What steps can you take to protect your car or truck?

Your first course of action should be to find out how your vehicle lender intends to handle what is likely to be an increase in delinquencies. If you have not done so already, visit your vehicle lender’s website to see if they have any “cononavirus” relief programs in place. Currently, for example, Ford Motor Credit, GM Financial, Toyota Financial Services, Hyundai Finance and others have plans available.

Similarly, Georgia’s Own Credit Union, Delta Community Credit Union and others have COVID-19 relief programs.

These lenders may ask for documentation of your hardship. If you intend to ask for a deferment, you need to follow their instructions to the letter. And realize that a deferment just means that your loan will be extended. Payments will not be forgiven. And you may be additional interest in exchange for extending your loan.

Lenders who serve “higher risk” borrowers, however, may not offer much in the way of help. One such lender, who services a large number of “buy here pay here” loans says on its website: “we understand our customers may be impacted during this time. While we are currently working on a program to help impacted customers, please connect directly with your local dealership and stay in close contact with us regarding any loan payment challenges you may encounter.”

You can assume that “buy here pay here” dealerships will be less accommodating. You should also assume that if your payment history has been spotty, your finance company will be less inclined to defer payments.

Whatever your dealer or finance company’s intentions, you need to know where you stand.

Along those lines you should not hesitate to reach out to the customer service representatives. Vehicle lenders are always concerned that a financially strapped purchaser may disappear with his/her vehicle and the economic disruption caused by the coronavirus will increase this concern. You are always better off maintaining open lines of communication with your vehicle lender.

What Should I Do if my Vehicle Lender Will Not Cooperate?

Even with deferments and cooperation from your vehicle lender, you will not be able to put off making payments forever. Other lenders may not work with you much at all. What is the worst case scenario?

Because cars and trucks are mobile and easily moved, vehicle lenders are allowed by law to use “self help” or repossession to protect their investments. Under Georgia law, a lender can repossess without warning the minute you go into default on your loan.

Your installment contract will define what constitutes a “default” – usually loans go into default if they are seven to fourteen days late, although some contracts only look for one day late.

Generally speaking the top tier lenders like General Motors, Ford, Toyota, Hyundai, and credit unions like Georgia’s Own or Delta Community will try to contact you about your missed payment before sending out the repossession agent.

Third tier lenders and “buy here pay here” dealers will usually skip the notification and move right into repossession.

Under Georgia law, a repossession agent cannot breach the peace to pick up a vehicle. This means that he cannot break into your garage or engage in a street brawl to pick up your car. This is why most repossessions occur in the middle of the night or mid-day in your work parking lot.

If you take action to block the repossession agent, you could find yourself facing a criminal charge for theft so hiding your vehicle or sitting in the car to stop the repossession is not a good solution.

If you conclude that a repossession is inevitable, you should remove your personal property from your car or truck as these items tend to disappear when you vehicle is seized.

Once your vehicle is taken it will be stored at an impound lot. Your lender cannot sell your vehicle without first giving you an opportunity to redeem it. By law, your lender must send you a “10 day letter” in which you are given 10 days to pay the balance in full plus costs to get your vehicle back. Once 10 days pass, the finance company is allowed to see your car or truck at auction and your ownership interests cease at that time.

Once the vehicle is sold, your lender will apply the proceeds against the remaining balance due under your contract. In many cases the auction price is insufficient to pay off the loan balance – the remaining balance due is called a deficiency claim. Your lender can sue you for this deficiency balance or sell the deficiency account to a debt buyer who can pursue you to collect this debt.

We often see large deficiency balances in cases where a vehicle was financed over a long period of time (5 or 6 years) or when someone traded in one vehicle for another rolled the balance due from the first vehicle into the contract for the second.

Can Bankruptcy Help?

Bankruptcy can stop a repossession. It can also stop the sale of your vehicle. Once your vehicle is sold at auction, however, bankruptcy will not help.

If you want to keep your vehicle, Chapter 13 bankruptcy creates a payment plan in which you basically refinance your loan. The idea behind Chapter 13 is that you need a vehicle to get to and from work and that your vehicle is essential to your financial rehabilitation.

Chapter 7 can stop a repossession temporarily but it is not designed to help you refinance and keep your vehicle. Chapter 7 will wipe out a deficiency claim.

Should You File Bankruptcy if You are Temporarily Out of Work?

Generally speaking, I am not a fan of filing bankruptcy when you are facing a temporary financial setback. Bankruptcy assumes a certain level of stability and consistency. If you file bankruptcy – either a Chapter 7 or Chapter 13 – while the economy is on full lockdown, you may have to amend or even dismiss in a month or two if you are suddenly re-employed with overtime.

That being said if you are going to look at bankruptcy now, I would be much more inclined to consider Chapter 7 as opposed to Chapter 13.

Bankruptcy is an imperfect remedy but it can be appropriate to stop a bad situation from getting worse. Susan Blum and I have represented thousands of honest, hardworking men and women in Atlanta area bankruptcy cases and we’re happy to answer your questions as well.

Call us or email us to schedule a free consultation by phone or Skype. We do ask that you fill our brief two-page questionnaire before our virtual meeting so that we can offer you the best advice.

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