Whether you are buying your first car or upgrading to a new model, it may come as a surprise that these days a new car can cost, on average, over $37,000. With car prices continually increasing, many people in Tennessee are taking out auto loans to pay for their new vehicles. In fact, in total $1.2 trillion is now owed on auto loans in the U.S.
This is troubling as more subprime loans are be being granted. These subprime loans are given to those whose credit scores are below 620. Subprime loans often are paid back for a longer time period, some lasting as many as seven years. This is problematic as it means that subprime debtors ultimately may not be able to afford to pay back what they owe on the auto loan. According to the U.S. Federal Reserve Board, the number of outstanding auto loan payments is going up, a problem that is only compounded by the fact that there is a larger group of debtors that are at a high risk of becoming delinquent on their loan.
Debtors who find that they cannot afford to make their auto loan payments may be concerned that their vehicle will be repossessed, putting them in a very precarious financial situation. After all, with no vehicle, they may not be able to get to work and bring in an income, meaning they fall behind even further on their other debts. It is a vicious cycle.
However, debtors in such situations do have legal options. Some debtors may qualify for Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, the debtor’s assets are collected and liquidated to pay back their creditors. Following this, many of the debtor’s debts may be extinguished. There are assets that are exempt from liquidation and, in some cases, this may include one automobile. Thus, many debtors need not worry that their car will be taken away if they file for bankruptcy.
The information in this post is useful, but it cannot promise any specific outcome in a bankruptcy filing and does not provide legal advice. Those who are having problems making their car payments and are wondering if their vehicle will be exempt if they file for Chapter 7 will want to seek professional guidance on the matter.