Is it better to let a car be repossessed or file bankruptcy?
When Florida residents have car loans they cannot pay back, it can be very stressful. If they allow the car to be repossessed, it may damage their credit for seven years. Choosing to file bankruptcy, on the other hand, may ding their credit for up to 10 years. Luckily, there may be alternatives to dealing with a burdensome car loan.
According to experts, if the car loan is the only credit obligation someone is unable to pay, bankruptcy may be overkill. However, that doesn’t necessarily mean that repossession is the best option. When a car is repossessed, the lender will sell the vehicle at auction and bill the debtor for the difference between what it sells for and what is owed on the original car loan. In addition, the debtor will be responsible for repossession and other fees the lender is allowed to add to the loan.
A better alternative may be for the debtor to attempt to sell the car him or herself. While the vehicle will likely sell for a loss, it will be less costly than what would be owed after a repossession. Another possibility is for the person to trade his or her car in for a new car loan that has a longer term and lower interest rate, which could substantially lower the monthly payment.
If these alternatives aren’t possible, people should remember that damaged credit doesn’t last forever. With time and careful repayment of other debt obligations, an individual’s credit history will bounce back.
Those having difficulty repaying their debts may find relief by consulting with a lawyer. Legal counsel could review the case and recommend the appropriate legal action, which may include filing Chapter 13 bankruptcy.