Should You Redeem Your Repossessed Vehicle?
Having your car repossessed is embarrassing. It can also be incredibly inconvenient, especially if you need to drive to work or school. In Florida, anyone whose car has been repossessed has a right to redeem the vehicle. However, this might not be the best option for you, so we encourage that you meet with a South Florida bankruptcy attorney to fully review the best path forward.
Florida’s Right to Redemption
Florida law gives a person with a car loan the right to “redeem” the vehicle, which essentially means that you pay off the full amount owed on the loan, including any storage costs and repossession fees. Unfortunately, you need to act quickly—before the car is sold. Once it’s sold, you lose any right to redemption.
Florida law does not require that lenders notify you when they intend to repossess the car. But state law does require that you receive at least 10 days’ notice of the sale, so you do have some time to try and scrape together the money.
Advantages and Disadvantages of Redemption
The primary benefit is that you get your vehicle back. Since you are paying off the loan, you will also be debt free going forward.
A primary disadvantage, however, is that you might be paying much more than the vehicle is worth. Cars depreciate rapidly in value, and your car might only be worth $10,000 even though the loan is for $14,000.
Redemption also isn’t realistic for most people. If you could afford to pay off the loan in full, you probably wouldn’t have fallen behind on monthly payments in the first place.
Reinstating a Loan Instead
Florida law also gives debtors the right to “reinstate” the loan by paying off all past-due installments, along with repossession charges and other associated costs. When doing so, you get your vehicle back, but you agree to continue paying on the debt going forward. You can reinstate a car loan at any time before the vehicle is sold. However, you can reinstate only once every 12 months and at most twice over the duration of the loan.
Reinstatement is a good option if you can only scrape together some money. By borrowing from friends or family, you might be able to cover past-due installments and related costs, allowing you to keep your vehicle.
Can Chapter 13 Bankruptcy Help?
Chapter 13 bankruptcy has a nice feature called the “cramdown.” Essentially, this technique lets a debtor rewrite their car loan on more favorable terms. Specifically, you can reduce the amount of the loan to the value of the vehicle.
For someone upside down on their car loan—meaning, the balance on the loan exceeds the value of the car—Chapter 13 bankruptcy might be the best choice out there. However, you must move quickly. You need to file before your car is repossessed. Doing so will stop any collection action in its tracks.
Don’t Lose Your Car without a Fight
The Plantation bankruptcy attorneys at Nowack & Olson, PLLC, have helped many motorists keep the repo man at bay. To learn more, contact us to schedule a free consultation.