Car repossessions have reached a figure not seen in over a decade. According to Fitch Ratings, the number of subprime auto borrowers who were at least 60 days past due on their car payments increased to 5.67 percent (5.67%) from 2.5 percent (2.5%), which was the figure reported in April 2021.
Numbers like these have not been seen since January 2009 when 5.05 percent (5.05%) of subprime car borrowers were at least 60 days late on their car payments during the peak of the Great Recession.
It is believed that this trend is due to the COVID-19 pandemic and the car shortage that occurred during that time. As factories shut down due to the pandemic hitting in March 2020, these shutdowns created an extreme supply shortage when it came to new cars across the country. Without new cars on dealer lots, car buyers purchased used cars instead. As a result, the price for used cars surged as demand grew. Car buyers utilized their stimulus checks to pay for vehicles that would not otherwise be able to purchase and take out loans that they would not have otherwise taken. Combine all these factors, and a perfect storm was created.
Now that stimulus programs have ended, consumers are stuck with these high loan payments and ever-increasing interest rates. The Fed continues to raise interest rates, making paying these obligations even harder. Most of these buyers likely agreed to a variable interest rate with the car loans, which means that every time the Federal Reserve increases interest rates to fight inflation, the interest rate with their loans also increases. All this combined has led to a growing number of drivers not being able to continue paying on their car loans.
If someone is behind on his or her car payments, that person can reach out to the current lender to discuss options for catching up on missed payments and for lowering current payments to make them more manageable. A loan modification may also be considered in order to accomplish this goal by either extending the loan in order to lower payments, reducing the interest rate on the loan, or even pausing the loan temporarily. If modifications are not possible, it may be wise to sell the car to pay off the loan.
Will Filing Chapter 7 Bankruptcy Prevent Vehicle Repossession?
When someone is behind on his or her car payments, a Chapter 7 bankruptcy case may allow him or her to catch up on these missed car payments, saving the vehicle from repossession. This moment of reprieve is offered through the bankruptcy’s automatic stay. Whenever a bankruptcy case is filed, the court issues an order known as the automatic stay. This stay puts a pause on all collection efforts on debts held by the filer, including collection on past due car loan payments. The automatic stay goes into effect immediately upon filing and lasts throughout the duration of the bankruptcy case. During this time, the lender cannot repossess the filer’s vehicle.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.