 Â Â
Benny Mendlowitz, Trustee |
 | I received the following email recently:Â
I bought a car last year, but I couldn’t afford it outright. I had to get a loan to cover the cost of the car and used the car as security for the loan. If I default, they’ll take my car away. What will happen, though, if I declare bankruptcy in Toronto? Are the rules the same? Will I lose my car? |
The answer to this very common question is “it depends†– how is your relationship with the creditor who holds your car loan?
Your car company, who loaned you the money, would rather you make your payments than take your car. This is true with every secured loan, where there is something pledged in security for the loan. So, if you’ve made your payments and have been a good customer, you’ll usually be able to keep your car and the loan while being bankrupt, as long as you keep making the payments on time.
If you haven’t been paying your car loan though, the car company will probably take your car back. This could very well happen to you – if you’re having trouble paying your off your debts, there’s a good chance that you’re behind in other bills as well. If this is the case with your car payments, your creditor will have no choice but take back the car.
The only time where it doesn’t depend solely on the relationship you have with your car company is if the contract you signed states you can’t be bankrupt. Certain companies have a policy that stipulates if you go bankrupt they will automatically repossess your vehicle. The companies that have this policy change on a regular basis, so if you’re concerned about your car loan, contact my office for a free consultation and we can review your loan agreement together.
If you’re considering bankruptcy, regardless of what your contract says, though, make sure you contact your car company beforehand to discuss your options. Let them know of your situation, that you’ve been a good customer, and that you’d like to continue to be a good customer. By talking to them, you will ensure that there are no surprises when you do file for bankruptcy. Your car company will be forthcoming in telling you exactly what their policies are and you’ll know where you stand with your car loan.
If you’re worried about your car loan and what will happen to it when you declare bankruptcy, contact my office at 310-PLAN. We can set up a free consultation to discuss your situation and all of your options. You can also e-mail me any questions you might have. Working through your financial situation might seem overwhelming, but together we can come up with a solution that will work for you and your family.
You must log in to post a comment.