In the Chicagoland area, owning a car is a way of life. We have to drive to work or school, we have to drive to the doctor’s office, and we have to drive to shop for groceries and other necessities. And, we need to have a car to do all that driving. If that car is leased or financed, then you contracted with the bank to make payments on the loan for your car. But what happens when you default or miss one (or more!) of the car payments?
Understanding a vehicle repossession
In Illinois, the auto lender can repossess your car after only one missed payment. However, a repossession company cannot just take your car. There are laws that must be adhered to, which can include, but are not limited to:
If your lender has accepted late payments in the past, the bank must send you notice prior to repossession.
The creditor or its agents may not not breach the peace. In retrieving your car, the repossession company cannot use force, violence, threats or enter into a locked garage.
The law also prohibits you from purposely avoiding repossession. You cannot hide your vehicle or physically restrain an agent from taking it.
Following repossession, the lender must send you a “Notice of Redemption.” This notice details the banks plans to sell or keep the car, and notifies you of your right to buy the car back within a 21-day grace period.
If your vehicle has already been repossessed, the repossession can be reversed
If your car has already been repossessed and taken from you, and you do not have the money to retrieve it, you can file for bankruptcy to get it back.
Chapter 13 Bankruptcy
Upon filing a Chapter 13 bankruptcy, the bank will return your car to you if your car was repossessed. (If it hasn’t been repossessed yet, filing bankruptcy will stop all collection efforts) In exchange for getting your car back, you will submit a payoff plan to your creditors, and you will have up to five years to pay the balance of the loan, including any missed payments. Depending on your situation and age of the vehicle, you might be able to lower the interest rate on the loan, or only pay back what the car is worth and the remainder of the loan. This type of bankruptcy will also halt the seizure of most other property.
Chapter 7
Under a Chapter 7 bankruptcy, you can redeem your vehicle by paying off what the car is worth (versus what you still owe on the loan). For example, if you owe $15,000, but the car is now only worth $7,000, you can pay the $7,000 and own the car outright. Because you are in bankruptcy, the remaining balance will be discharged. However, you must be able to pay the full amount the car is worth. This option does not allow you to make a plan and repay your debt over time. And generally it is difficult for people in bankruptcy to obtain enough money to pay off a large loan.
There are finance companies, such as 722 Redemption, that will give you financing in order to redeem your vehicle, if approved. However, many times the interest rates are very high, so you should talk to an experienced bankruptcy attorney to decipher if redemption would be beneficial to you.
Or decide you can’t catch up on the payments, or just don’t want to keep the vehicle anymore, in which case you can surrender your car and will no longer be held responsible for additional payments. The bank will take your car and resell it. If you are considering this, a Chapter 7 bankruptcy may be a better option for you. If having your car is essential to your livelihood and you need helping getting it back, filing bankruptcy can help.
If your car has been repossessed, reach out to Thurston Law Firm at 312-818-8008 or cthurston@thurstonlawfirm.com. Our office can help advise on your bankruptcy options and help get your car back.