An auto loan charge off while in bankruptcy is a process through which, despite being unable to make the payments on your car, you may be able to keep the vehicle instead of forfeiting the money you’ve put into it. This is essentially a loan that a consumer can apply for which will go towards paying for the established residual value of the car. It’s important to understand that this is a different scenario than if you had stopped making the payments on the car because of your financial difficulties and the lender repossesses the vehicle. In this case, the process is specially tailored for people who have no choice but to declare bankruptcy and still maintain their car. The following are some of the steps needed in order to obtain a loan charge off.
When someone files for bankruptcy there are normally two procedures, either Chapter 7 or Chapter 13. Depending upon which one has been filed, the court will either appoint someone designated to help you arrange a payment plan in which to satisfy your creditors, or completely liquefy your assets in order to pay off everyone that is owed. A “341” meeting is held to determine all of your asset values and gather up how much debt is owed and to whom. This is the first step in beginning to apply for any loan.
In the case of a Chapter 13 bankruptcy, a court appointed trustee will be supervising all of your financial matters. They must supply a written permission for you to seek out a loan to pay off the residual value of the vehicle. Both of these matters can be time consuming, so be prepared to be patient and supply a lot of information as needed.
There are many lenders out there who specialize in high-risk loans and are willing to work with consumers who have bad credit or are in bankruptcy proceedings. Doing a lot of research will help you find the best lender who is ready to work with you and your individual needs. Obviously, a good place to start is the Internet, as most financial institutions have websites designed to walk you through the process and understand this complicated endeavor.
Try and find more than one lender who will work with you. Identifying multiple institutions and comparing their rates will give you a better picture of what is available. Due to the high risk of this type of loan, the fees and interest rates will not be the ideal situation. On the bright side, you will not be seeking to pay off the entire value of the vehicle, only the current residual fair market value, and in this case, that will be determined through your bankruptcy proceeding. This could help you in the long run and lower your overall cost, which in turn will mean you are looking to borrow less money.