Articles Posted in Car Repossession

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Yes, it will. The deficiency that results from the sale of a repossessed car or truck (or motorcycle, or boat, or any other form of transportation that was repossessed) is considered to be “unsecured” debt. Unsecured debts (or that portion of the debt that is described as unsecured) are subject to discharge in a St. Louis bankruptcy.

But let’s back up just a bit. When you take out a loan on a car (commonly referred to as “financing an automobile”), you are signing a contract in which you promise to make monthly payments to the creditor in order keep the asset. If you fall behind on the payments, the creditor can come take the asset back (this is why it is called a “repossession“; the creditor is taking back possession of the asset). There is a period of time that must pass before the creditor may resell the car, but once that period of time passes, the car will undoubtedly be sold.

What normally results from such a sale, however, is a “deficiency”. This occurs when the sale of the repossessed car brings in an amount that is less than the current balance. So for example, let’s say you owe $10,000 on the balance of the car loan when the automobile is repossessed. But when the car is resold by the creditor, it only sells for $5,000 (the market for repossessed cars is usually a lot cheaper). This would obviously result in a deficiency balance of $5,000. And it is this amount that the creditor can demand from you. If you are unable to pay this amount (either in a bulk payment, or through some sort of repayment plan), the creditor will most likely sue you for the $5,000 deficiency. Once they receive a judgment in their favor, the creditor can then move to garnish your wages, freeze your bank account, or placed a lien against your house.

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Then they have clearly broken the law. This is a somewhat common tactic used by some debt collectors in their (not so noble) attempts to get money out of you. It is a shame that such tactics are resorted to, but it happens all the time. The problem, of course, is that it is completely unlawful.

The body of law that governs the activities of the collection market is the Fair Debt Collection Practices Act (FDCPA). It is a federal statute that lays out precisely what a collector can and cannot do while collecting on a debt. The language of the law is very straightforward, but it is amazing how frequently it is broken. For instance, Section 806(6) of the act state that, “… the placement of telephone calls without meaningful disclosure of the caller’s identity” is a violation. Or Section 807(1), which states, “The false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any State, including the use of any badge, uniform, or facsimile thereof” is a complete violation of your consumer rights.

This means that if a collection agency calls you and states (or implies) that they are acting under the authority of the local police, they are lying through their teeth (and more importantly, breaking federal law). So long as such a violation can be shown to have happened, the damages to you are monetary (usually about $1,000). The other great component of the law is that the collector has to pay for your attorney fees. This means that there are no upfront costs to you for having an attorney file a case for you.

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Only certain kinds of debts are paid back in a St. Louis Chapter 13 bankruptcy. These would include mortgage arrearage (in other words, the amount of money you have fallen behind on your house payments), car loans, tax debt, back child support, and sometimes a portion of your unsecured debt (like credit cards, medical bills, and payday loans). But the exact amount you pay back per month depends on a several key factors.

A Missouri Chapter 13 bankruptcy is described as a repayment plan over the course of three (3) to five (5) years during which you pay a certain monthly amount to the Trustee. The Trustee then distributes these funds to the various creditors listed in your Chapter 13 plan. At the end of the plan, all the remaining unsecured creditors are discharged (i.e. knocked out forever). This in contrast to a St. Louis Chapter 7 bankruptcy, where all the unsecured creditors are discharged right away.

The main reason why someone would file a Chapter 13 would be because they have fallen behind on their mortgage, are risking foreclosure, but are not in a position to come current on the note right away. Filing a Chapter 13 will stop the foreclosure sale from going through, and allow you pay back the arrearage over a period of years (which is far better than coming up with the funds immediately). Another major example would be a case in which your car is repossessed. A 13 will allow you to get the car back, and pay off the balance of the loan with a much better interest rate than you are probably handling right now. In addition, it may also be possible to cram down the amount owed on the car to the actual fair market value of the vehicle. This can often end up shaving several thousand off of what you owe.

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Yes, it does. And depending on how quickly you get your Missouri or Illinois bankruptcy filed, you can actually prevent the creditor from taking any action at all (so as to avoid any money being garnished from your pay checks).

The filing of a bankruptcy is accompanied by what is called an Automatic Stay. This is a fancy way of saying that everything stops. All creditor activity must immediately cease, including phone calls and letters. This Stay also extends to anything awarded to the creditor by way of a hearing. When a creditor sues you for breach of contract on a debt that you owe, the judgment from the court allows the creditor to do one of three things: 1) garnish your wages; 2) levy your bank account; 3) place a lien against your property. The creditor can execute one of these options, or it can do all three at once. The most likely, of course, is the wage garnishment. The creditor simply sends your employer the necessary documentation, and the payroll department begins to deduct.

But once a bankruptcy is filed (whether it is a St. Louis Chapter 7 bankruptcy, or a St. Louis Chapter 13 bankruptcy), the garnishment must end. Your bankruptcy attorney simply notifies the creditor’s attorney of this fact, and that attorney then sends a Release of Garnishment to your payroll department. In addition, the underlying debt is discharged, along with the rest of your unsecured creditors (whether they be in the form of credit cards, medical bills, payday loans, deficiencies from a repossession or foreclosure, etc.)

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I hear this comment a lot from clients. The level of stress that a mountain of debt can produce can literally be overwhelming. Credit cards, medical bills, payday loans, old utility bills, cell phone carriers, overdrawn bank accounts, deficiencies from a repossession, past due loans, etc. All of these things can build up and spiral out of control. And your life can seem like an inescapable trap.

But it does not have to remain this way. In fact, the relief that you seek is more easily attained than you may think. For instance, when you file a St. Louis Chapter 7 bankruptcy, all of your unsecured debt (the stuff mentioned above) is discharged. This means that the debt goes away forever. The creditors cannot demand payment from you anymore. The creditors cannot call you anymore, or write you letters, or harass you at work. And you are not obligated to pay them anything ever again, or explain anything to them, or even talk to them. They are all gone, in one fell swoop. Once this discharge occurs, you will be in a perfect position to begin rebuilding your credit score. Most people who file a Missouri or Illinois bankruptcy will typically find themselves making major purchases (like a house) within two years, and reestablish a good credit rating within one year.

Or if the better option for you is a St. Louis Chapter 13 bankruptcy, then the relief from debt is handled in a slightly different way. A Missouri Chapter 13 is a repayment plan. This allows you get caught up on things like your mortgage (so you can save your home from foreclosure), to make sensible payments on your car (so that it does not get repossessed), take care of your tax debt, and come current on any back child support obligations. All of these kinds of debts are consolidated into one easy, monthly payment to the Trustee. The Trustee then distributed the funds to the various creditors listed in your Chapter 13 plan.

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There are certain limitations, but it depends largely on what type of Missouri bankruptcy you wish to file. The two main options are a St. Louis Chapter 7 bankruptcy and a St. Louis Chapter 13 bankruptcy. These chapters have substantive differences in how debt is handled (or whether you would even qualify for one). But the debt limits proscribed by the Bankruptcy Code are very clear.

When you file a Missouri Chapter 7, there are no limitations as to the amount of unsecured debt to be discharged. A Chapter 7 gets rid of these kinds of debts forever, such as credit cards, medical bills, payday loans, deficiencies from a car repossession, gym memberships, and even magazine subscriptions. Once the debts are knocked out, you can immediately begin to rebuild your credit rating as you move forward with life. So if the amount of unsecured debt you are currently carrying is $30,000, or $300,000, or even $3,000,000, it’s all going to get discharged.

There are, however, debt limits in a Missouri Chapter 13. A Chapter 13 is described as a repayment plan over the course of three to five years during which certain debts are paid back. Primary examples of the kinds of things to be paid back would be mortgage arrearage, car loans, tax debt, back child support, attorney fees, and sometimes a percentage of your unsecured debts. If the amount of unsecured debt is above $336,900, then you will not qualify for a Chapter 13. Or if your secured debts (like house mortgage or car note) are above $1,010,650, you again will not qualify under this chapter of bankruptcy. In this kind of situation, you may wish to consider a Chapter 11 bankruptcy (which is described as a reorganization).

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Yes, you absolutely can. In fact, it is rare when such bills are not a part of a bankruptcy. Very frequently, people will have upwards of several thousand (if not tens of thousands) in medical-related bills.

Medical bills (whether they originate from your doctor’s office or the hospital) are described as unsecured debts. Unsecured debts are debts that have no collateral attached to them. In other words, there is nothing securing the underlying amount that you owe. A secured debt (like a home mortgage or car note) does have collateral attached (like the house or the automobile). With a secured debt, if you don’t pay the monthly installment, the remedy for the creditor is to either foreclose on the loan, or repossess the car. But with an unsecured debt, the remedy for non-payment would be to call you relentlessly, and then eventually sue you for breach of contract (and once they get a judgment, they could move forward with a wage garnishment, bank levy, or lien against your house).

But these kinds of debts can be taken care of in a Missouri bankruptcy. In a St. Louis Chapter 7 bankruptcy, all unsecured debts (credit cards, medical bills, payday loans, etc.) are discharged. This means that the creditor can never again demand payment from you, call you, or anyway attempt to collect on the debt ever again; and you will never again be obligated on the debt, to either make any further payments or answer the creditor’s questions. It simply goes away for good.

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The answer to that question depends on your particular set of circumstances. Each individual is different, and every situation requires certain analysis. But in the end, which chapter of Missouri bankruptcy you file should not only make sense for you in your current situation, it should also take into account the long-term consequences as well.

To begin with, there are two main chapters of bankruptcy that an individual (or married couple) can file: St. Louis Chapter 7, and St. Louis Chapter 13. A Missouri Chapter 7 is described as a ‘straight discharge’ of unsecured debts. Things like credit cards, medical bills, and payday loans are knocked out immediately. You may keep assets like a house or a car, so long as there isn’t a great deal of equity in them (and yes, if you want to keep these items, you’ll have to continue making the regular monthly payments). From the time you file, to the time you receive the discharge, is about three or months (which is pretty quick in the legal world).

Chapter 13 bankruptcy is a very useful tool as well. Most people believe that if they have to file a 13, that they have somehow lost out (as if they have missed their chance at a 7, and now they are stuck with the other chapter of bankruptcy). A Chapter 13 is described as a repayment plan over the course of three to five years, in which certain debts are paid back. During this repayment period, debts such as mortgage arrearage, car loans, tax debt, and back child support are paid in full. In addition, it is also possible to get rid of your unsecured debts in a 13 as well.

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Yes, they can. But let’s back up for a moment and examine why this could be the case.

When you purchase a car, you enter into a basic financing agreement (unless you buy the car outright, in which case the former owner simply transfers title to you). This agreement lays out a number of provisions, including what happens if/when you fail to make good on your monthly payments. Failure to make monthly payments can/will result in a repossession of the car (wherein the creditor sends someone out to collect the collateral). Once the car in back in the creditor’s possession, you have the opportunity to buy out the loan, file for bankruptcy (typically a St. Louis Chapter 13 bankruptcy), or simply allow the creditor to keep the car and sell it to someone else.

If you opt for the latter option (i.e. you allow the creditor to sell the car), then the creditor will sell the car to the highest bidder. Almost always, this sale will result in a deficiency. The deficiency that is created by the sale could be thousands of dollars. For example, if your car at the time of repossession had a loan balance of $15,000.00, and the creditor sold the car for $8,000.00, there would be a deficiency of $7,000.00 (which is of course the difference between the balance of the loan the amount it sold for). The creditor will at this point expect you to make good on this deficiency.

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