Florida residents may be aware that a lender may repossess a car for not making loan payments. Even if the car is repossessed, a borrower may still be on the hook if the amount that the lender receives from a subsequent sale is less than the balance remaining on the loan. This is referred to as a deficiency, and the borrower is responsible for paying that.
In many cases, an individual who could not afford to make a car payment may not be able to afford a deficiency payment either. Therefore, it may make more sense to file for bankruptcy as it may prevent a lender from pursuing the borrower for that balance. Filing for bankruptcy may also put a stop to any lawsuits or other collection action that a lender may be pursuing. However, those who are thinking about taking this step are urged to do so carefully and only if the positives outweigh the negatives.
Debtors may be able to use bankruptcy to reorganize a debt or renegotiate the terms of the loan. A lender may be willing to renegotiate because it increases the odds of recouping more of the loan balance. It may also be possible for a debtor to surrender a vehicle before it is repossessed and without the need to make any future payments.
Filing for bankruptcy may stop repossession or give an individual time to renegotiate or reorganize a secured debt. This is because a debtor may be entitled to an automatic stay of creditor actions when a case is filed. To qualify for Chapter 13 bankruptcy, an individual must have regular income and submit a repayment plan for approval. There are other requirements that an attorney can outline.