What happens after car is repossessed (pre-BK)

[avengers]

As I posted in other threads, I'm preparing to file for chapter 7 in a few months. My car was repossessed lat night. Not a huge surprise, since we hadn't made a payment since November. Still a small shock because they specifically told us they were going to take the car on Friday, but took it last night. But not a huge deal because we didn't keep anything valuable in the car.

We are worried about what happens next. The car is underwater, worth about $17k to $18k, while we owed $25k on it. My understanding is that they are going to auction off the car and then go after us for the deficiency. Does anyone know the common timing for this to take place?

And are they just going to start sending letters and making phone calls to get the deficiency, or are they immediately going to file a lawsuit? If they file a lawsuit, what should I do? Just let it default and go to collections, then list it as a debt to be discharged? I assume that, if they just start normal debt collection efforts, I just list it when I file BK, right?

[AngelinaCat]

The car will be sold at auction, and you will get paperwork informing you that you are going to be sued for the difference between what you still owed on the loan, and what the automobile sold for at action.

We are in Florida, so I don't know what the 'timing' is, but we co-sign a loan for an acquaintance that defaulted. Once the car was surrendered, I would say it took about six months for the lender to sue both us and the person we co-signed for.

This is no biggie, and you will have time to respond and all of that. list this in your BK paperwork. Once you file CH7 and are successfully discharged, that debt will go away.

Just don't ignore the paperwork and allow them to get a default judgment against you. That takes some extra court work after your discharge to get a judgment vacated.

Good luck to you!

[avengers]

6 months is quite a while. What if we have to file chapter 7 before they sue us?

[bcohen]

If you file BEFORE they sue, that's even better. In that case, the loan obligation is discharged, which means that you are not personally liable for the deficiency, if any. As a result, the lender will have to take whatever the car sells for, and write off the rest. The automatic stay (while your case is open) and the discharge injunction (once the case is closed) will prevent the lender from suing you, sending collections letters, or having a collection agency call you to request payment.

If you file AFTER they sue, but before a judgment is granted, then the lawsuit will be put on hold by the automatic stay, and it will then be dismissed once your bankruptcy is discharged. As above, the lender will be barred from pursuing you for any deficiency.

If you file AFTER they sue, and AFTER a judgment is granted, the debt will still be discharged. The judgment will show up on your credit reports, but it will say "resolved through chapter 7 bankruptcy" or "included in chapter 7 bankruptcy". If you own real estate, then you would have to take extra steps to avoid the judgment lien during your bankruptcy. If you do NOT own real estate, then a judgment doesn't really matter if you plan to file for bankruptcy. Once the underlying debt is discharged through bankruptcy, any judgment becomes forever unenforceable.

[Sonic]

I was in a similar situation, but I was able to pay for the lawyer's fee and filed for bankruptcy to protect me from the repo men.

But the difference is that I already paid off my car, a 2002 Honda Civic. Then two years ago, i went to my bank to get a loan out so I can consolidate my debt ($5000), and used my car as a collateral. When it got worse late last year, I stopped paying the loan for 4-5 months and that's when the an investigator from a repo company was looking for me at the place I was staying at. (Luckily I was at work). I panicked and just saved up the money so I can file.

Literally for two months straight, I parked my car at least a mile away from my house and luckily, I was able to file before it got worse. That and I live in a very densely populated area. Funny enough, the repo company only dropped by on Sunday mornings, the days when I'm not home. Nor did they ever stalk my house, because there was always that possibility of them trying to tail me as I walk towards my car. IN FACT, they seemed really, really passive (despite the horror stories I've read online) and I figured that they had bigger fish to fry. And most likely, it would cost them more money if they were more aggressive in finding my car.

[avengers]

Just thought I'd update this thread in case anyone wants to know the timing.

The car was repossessed on March 6, 2014.

We received a "Calculation of Deficiency" on April 21, 2014 (we still owe $9500).

They then sent a "Notice of Acceleration" on May 2, 2014, noting that we owe the entire amount.

They haven't sent us any further notices. Still haven't filed bankruptcy yet, as both the wife and I are still unemployed.

[bcohen]

Do you own any real estate? If not, then it is entirely possible that you won't even be sued for this debt. It is also highly probable that the lender will see that you don't own any real estate and choose to sell the debt to a junk debt buyer (JDB) who may sit on the debt for several years to let the interest accrue before suing to collect.

I walked away from a credit card with an $11k balance, and several thousand in hospital bills, and was never sued any of these debts. I did end up being sued by Discover Card--over 3 years after I quit paying--for a credit card with a $3000 limit, which had ballooned to over $6000, and resulted in a judgment for over $8000. I filed for bankruptcy, and since I do not own any real estate, the judgment doesn't really matter as the underlying debt has been discharged.