Is there such a thing called car bankruptcy?

Question

My husband I purchased a vehicle in October of 2006 and we purchased it for $33,000.00, we now owe about $31,000.00 and the car is worth about $20,000.00, so we are upside down about $11,000.00. We desperatly need to purchase a different car. Is there such a thing called car bankruptcy? We would like to file bankruptcy, but the only thing we own is the car and a couple of credit cards... it's not like we own a house or anything. What would we have to do? How would we go about it?! If we file bankruptcy (for anyone of you that have) how does it affect you in the long-term (buying a house, buying a different car we can afford, etc) My husband has EXCELLENT credit and we are afraid it will ruin his credit, but we would honestly like to start over and start fresh. What would you suggest? What is the BEST alternative to get out of this car and out of this negative equity?! Any suggestions would help, even better if you have been through this...

Answer 1

No there is no such thing as a car bankruptcy...and worse, if you were to file bankruptcy and have the vehicle repoed you are legally not allowed to take another loan out when in the bankruptcy and after good luck getting a loan (you have to go to one of those buy here pay here places that charge 30% interest, then you would really be upside down in your loan).

You are better off just paying more than what you owe every month to try to get out from under the loan...or take out a loan to pay for the negative equity you have...

Don't ruin the excellent credit your husband has worked so hard to build because of this loan. Also you don't state why you "desperatly need to purchase a new vehicle." Is is because you are upside down or because there is something mechanically wrong with the vehicle. If it is because you are upside down then just wait it out...it will get better with time.

Answer 2

No such thing as car bankruptcy, what you may be thinking about is repossession; and believe me, that is not "a mild mark" on your credit. Even if it is voluntary; you cannot simply "give the car back". You signed loan documents stating that you would pay the loan in full, giving the car back is voluntary repo, the bank or lender will auction off the car and whatever is left of your loan after the auction is still your loan. They will also throw in legal fees and interest. You are better off trying to sell yourself for what you owe....if that's not possible, try to make arrangements with the lender on a more affordable payment. Unless you are up to your neck in unsecured debt, bankruptcy is not worth it; it will drop your credit into the 500s or worse, making it not impossible to buy another car or a house, but very expensive. If you file BK, you must either surrender the car for repo or sign a reaffirmation agreement stating you will keep the car and continue making payments. If you can't keep it, a repo is better, but please try to sell on your own first, a retail sale will produce more $$ than the car being auctioned; but don't sell the car for less than you owe without the bank's approval, they won't release title. You may be able to work with a dealer (particularly if they do business with your bank) to trade the car in for a less expensive one, but if you are as under water as you state, it would be hard ot get your payment down low enough.....perhaps an extended term, like 72 or 84 months. Talk to your lender and maybe a car dealer about all of your options. Good Luck

Answer 3

Unless your credit card debt is extremely large, you more then likely will not be able to file for bankruptcy. Plus bankruptcy will affect your credit for 10 years. Try to sell it, or return it. You will still have to pay on it if you return it, but it will not be the full amount of your loan. Not many lenders do this anymore, but you can ask. Also, if its the payments or the amount that is making you want to get rid of the car. Try to refinance it. If your husband has good credit this shouldn't be a problem.

Answer 4

no there is no such thing as car bankruptcy and even if there was with todays rules and laws you would still be liable for payments. The only way to get within equity is to make additional payments on the loan in order to get your owed price down to where it is worth. Have no idea how you got that far turned around in your equity, but as far as I can see you are stuck. Check kbb.com to see what you might be able to get selling outright, it will be more than trading it in maybe that will reduce your loss somewhat.

Answer 5

I don't have a happy solution but I can share with you the options I've been given by different people I know. Supposedly you can turn the car back into the dealer (consequence is a mild mark on your credit but nothing like bankruptcy), Bankruptcy is more an option for those who have major debt ( I like you am in a hole but only a car hole). Other options = use your imagination.