Iowa Bankruptcy Lawyer Explains Finance Companies Charge-Off an Account in Arrears on a Vehicle
May 8, 2012
Des Moines, IA (Law Firm Newswire) May 7, 2012 – Debtors that fall two months behind on their vehicle payments, usually have their car repossessed.
Once a debtor has gone past being two months in arrears on their vehicle payments, and keeps missing those monthly payments, the finance company or back, classifies the account as charged-off. This should not be confused with the term discharged, although many in this situation do assume their debt has been discharged. In reality, a charge-off does not mean the vehicle owner is no longer responsible for the loan.
This applies even after the vehicle has been repossessed and sold at auction. Iowa bankruptcy lawyer, Kevin Ahrenholz suggests that if the situation relating to a vehicle is unclear, then discuss it with a qualified bankruptcy attorney to get the right answer.
In some instances, debtors know they are unable to continue making payments on their vehicles, and they make arrangements for a voluntary repossession. They are forthright and honest about their situation, contacting the bank to let them know they are in financial difficulty and would like to return the car to them. While this may be awkward for the debtor, it is the most ethical way to deal with this type of issue.
There are individuals that continue to drive their vehicle, even while they are in default. Eventually, the lender sends out a tow truck to retrieve it. At that point, the lender or bank typically resorts to selling the vehicle at auction, or through a private sale. Iowa bankruptcy lawyer Ahrenholz suggests it is not a good idea to get into a repossession situation, as the result in a negative entry on one’s credit report, which could lead to further financial difficulties.
Once the lending institution sells the car, they deduct the sale proceeds from the balance owing on the original loan. In most cases, the sale price does not pay off the loan. This means the debtor in default is still responsible for paying that new balance, and if they choose not to do so, they may face a civil lawsuit that results in a deficiency judgment.
It is always best to talk to an experienced Iowa bankruptcy lawyer if you have questions about your vehicle, what to pay, when to pay it and whether or not you can even afford to keep it. The ultimate goal of filing for bankruptcy is to start fresh without debts, and there are many decisions that need to be made during the process.
Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact an Iowa bankruptcy attorney, Iowa bankruptcy lawyer, or set up an appointment, visit http://www.iowachapter7.com or call 1.877.888.1766.
Kevin Ahrenholz
309 Court Ave., Suite 805
Des Moines, IA 50309
1.877.888.1766
Offices in Des Moines, Cedar Rapids, Waterloo, Mason City, and Vinton.
