B. Grant McNutt

Having your car repossessed can be catastrophic. When repossession happens, it’s usually because you’re already struggling financially. Suddenly, you may find yourself without the transportation you need to keep income flowing, whether that means driving to work or job interviews. And, you also need your vehicle to take your children to school, grocery shop, get to medical appointments and more.

Unfortunately, many Alabama residents are at risk of vehicle repossession. While nationwide just 4% of car loans are in default, that rate is 9% for the state of Alabama. And, in some areas, including Lauderdale County the rate is even higher than the 9% state average. Under Alabama law, a lender with a security interest may repossess property as soon as a single payment is past-due, unless the contract says otherwise.

The good news is that Alabama law requires that a creditor that repossesses your car must provide you with notice before disposing of the vehicle. That notice includes information about how you may be able to get your car back.

Alabama Notice of Intent to Sell Collateral and Right of Redemption

The notice required before sale of collateral includes information about when and how the property will be sold and what will happen after the sale. The short version is that if the vehicle sells for more than the combined total of the amount due and the costs of repossession and sale, you’ll get the extra money (unless there is another lien or legal obligation in play). If the proceeds of the sale are less than the combined total of the amount due and the costs of repossession and sale, you will still owe the difference. Unfortunately, this is what usually happens and you are left with what is called a deficiency balance.

The notice must also tell you when and where the property will be sold, and whether it will be sold through a public auction or private sale. And, most importantly, you must be advised that you can reclaim the vehicle at any time before the sale by paying the full amount due–that is, the entire balance of the loan and any outstanding fees, plus costs incurred in the repossession and preparation for sale. The notice must also contain information about whom to contact to find out exactly how much you would have to pay to redeem the repossessed vehicle.

If the vehicle is to be sold at public auction, you may also attend the sale and bring bidders to attempt to purchase back the vehicle. Note, however, that while you may be able to reclaim the vehicle for less with less cash on hand, you will likely still ultimately be responsible for the difference between the purchase price and full balance plus costs. This is the deficiency balance previously discussed above.

Bankruptcy and Repossessed Vehicles

Of course, if you weren’t able to keep up your scheduled car payments and you weren’t able to catch up your past due balance then you will find your vehicle in jeopardy of repossession. If you want to explore the possibility of using bankruptcy to keep your car and avoid repossession, you’ll have to act quickly.

In Chapter 7 and Chapter 13 bankruptcy cases, an automatic stay is entered as soon as the bankruptcy petition is filed. The automatic stay is an order that prohibits creditors from taking any collection action while the stay is in effect. That includes collection letters, collection calls, filing lawsuits, moving forward with lawsuits already filed, garnishing wages, disconnecting utilities, starting eviction proceedings, commencing foreclosure actions and the topic of this article repossessing vehicles. The filing of a Bankruptcy will protect your vehicle from repossession, but for how long depends on the Chapter you file.

Chapter 7 and Repossession

The options in Chapter 7 bankruptcy are limited. The filing of the Bankruptcy might buy you enough time to catch up your payments and get you right back on track to simply sign a reaffirmation agreement with the creditor. You also might be able to negotiate to purchase the vehicle outright for a lesser amount or to arrange a new payment plan with the lender, but these 2 options are long shots if they really want the vehicle. Although the automatic stay typically remains in effect for the duration of the Chapter 7 case (Approximately 3 to 4 months to receive your discharge), the automobile lender may file a Motion for Relief from Stay and be granted court permission to come repossess the vehicle prior to the Chapter 7 discharge so you have to act quickly. The upshot is if the creditor ultimately is allowed to repossess and take possession of the vehicle, any amount left owed after their sale and disposition of your vehicle is forgiven when you receive your Chapter 7 discharge. So the creditor has no recourse against you for any deficiency and you don’t owe them anything further.

Chapter 13 and Repossession

Chapter 13 is typically a much better option for avoiding repossession. We work with clients every day to help reduce their overall monthly expenses while also keeping their vehicles. A structured Chapter 13 will reorganize your debts to make your expenses fit within your income.

The practical knowledge to take away is that “an ounce of prevention is worth a pound of cure.” In 99% of situations, you will know if your vehicle is about to be repossessed. Don’t wait! Don’t take risks with your assets, before you take any action, please give us at Bond & Botes a call and speak with one of our experienced attorneys and schedule a free consultation to allow us to help you. We can help protect your property and your income. We can have a case prepared and filed very quickly in order to prevent a repossession from happening in the first place. We can alleviate your stress! We want to help and we can help you!

Alabama State Bar requires the following: “No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.”

Bond, Botes, Sykstus, Tanner & McNutt, P.C.

Web: www.bondnbotes.com

Facebook: facebook.com/Bond-Botes-Sykstus-Tanner-McNutt-PC-203986783117475/

102 South Court St, Suite 314, Florence, AL 35630

Phone: 256-760-1010 • Fax: 256-760-1023

Office Hours: Monday – Friday • 8am to 5pm

No representation is made that the quality of legal services to be performed is greater than the quality of legal services to be performed by other lawyers.