Can I Wipe Out My Vehicle Title Loan After Being Declared Bankrupt?Fast Action Finance SEO
Getting a car title loan is easier compared to other traditional loans. One, anyone can get a car title loan as long as you own a car that is insured. Second, having a bad credit score does not mean you cannot qualify for collateral loans in Toronto. Your car title serves as a security until you repay your loan. Third, the processing time for a car title loan is shorter and not much paperwork is needed. All you need to have is a lien-free car title that is insured.
It is always wise to sit down with your lender before signing off on a loan and get to understand all their terms of the loan. You should ask all the hard questions like what happens if you are unable to repay a loan and if there are other ways to settle your debt. Many lenders will work with you to come up with a reasonable payment plan.
This article will help you understand what happens in the event you are not able to pay back your car title loan due to bankruptcy. It will also shed more light on what happens when you file for bankruptcy if you have a car title loan.
Chapter 7 Bankruptcy
To answer the question of whether you can wipe out a car title loan after you file a bankruptcy, a short answer would be yes. Filing for bankruptcy will clear you from making further payments but the lender still has security over your car. When you sign on loan application forms, you give a lender the right to place a lien on your vehicle, and in the event you are unable to pay off your debt, then they have a legal right to repossess your car and sell it to recover their money.
Filing a bankruptcy does not help you avoid a bad credit on your financial report either. There are other ways you can approach to help settle your debt and some of them include:
Car redeeming is included in Chapter 7 bankruptcy, which states that you can redeem your car from the lender for its current market value. For example, if you owe a lending company $6,000 and the market value of your car is $2,000 you can redeem your car from the lender for $2,000. That means the remaining $4,000 becomes unsecured debt. After filing a bankruptcy case, you don’t pay the remaining amount. Most people are unable to redeem their cars since they do not have the amount needed. You need to make a onetime pay off as no installments are allowed.
Chapter 13 bankruptcy
Chapter 13 bankruptcy allows you to redeem your car the same way Chapter 7 bankruptcy does. Only Chapter 13 comes with an exception that you cannot redeem your car if you used the loan money to buy a car within 910 days before filing for bankruptcy. If this does not apply to you, then you can redeem your car by paying the market value of the car. However, in this case, the court approves that you can pay the amount in installments that can be extended up to 5 years maximum.
Try to negotiate with the lender after filing for bankruptcy
Some lenders are willing to negotiate on loan term repayments after a bankruptcy is filed. You can meet your lender to agree to new terms and the lender can work out on new terms. They may choose to reduce your interest rate or the monthly payments. You can also agree to negotiate on the loan balance. However, a lender can only agree to meet you for negotiations if the value of the loan balance is more than the current value of the car.
When you approach a lender for a car title loan, they make sure that you are able to repay off your loan and it becomes easy when you have a lien-free vehicle. They understand that some borrowers come in genuinely seeking for cash with all the intent of repaying back but, sometimes things do not go as planned. It is therefore advisable to always sit down with your lender and be honest about what is happening with your finances and if you feel you need a new repayment plan then you can work that out with your lender. Never rush to file for bankruptcy before trying out other repayment options.