Avoid Property Repossession

Repossession of your property, including your car or home (known as foreclosure) occurs when a lender takes your property because you failed to make your monthly payments. In some states, cars can be repossessed without providing you warning that your car will be taken on a particular day. Repossession not only damages your credit but it can also be very traumatic for you and your family. There a number of ways that you can avoid repossession of your property even after you have missed some loan payments.

Steps

Repaying Late or Missed Payments

1. Reduce expenses. If you find that you are unable to make your monthly car or mortgage payment, you should evaluate whether there is a way for to reduce your expenses. This may mean getting rid of cable television or not buying your daily coffee. The extra income you saved by reducing your income may help you afford to make your loan payments. Some simple ways to reduce your expenses include:
   • Unplug all electrical devices that you are not using.
   • Lower the temperature on your hot water heater to between 125 – 130 degrees Fahrenheit.
   • Cancel your gym or other memberships.
   • Cancel newspaper or magazine subscriptions.
   • Cook and bring your own meals rather than buy lunch.
2. Make up late payments. Even though you missed a payment doesn’t mean that your lender will automatically begin repossession proceedings or that you are in default. Generally, your lender will notify you that your loan is in default and that they are going to begin repossession/foreclosure proceedings. Many loans allow you to stop repossession by bringing your loan current, which means making your back payments and paying off any late fees.
   • If you think you will be unable to make a payment or have already missed one, you should contact your lender immediately. They may be willing to waive your late fees or work out a payment plan so that you can payoff any missed payments.
3. Get a loan from a family member or friend. One way to pay-off missed payments is by asking for a loan from a Ask Your Parents for Money or friend. While it may be difficult for you to ask to borrow money, it is may be more difficult for you to lose your car or home, especially if your car is the way that you get to and from work.
   • If you are only experiencing a temporary hardship, you can explain that you only need the money to help you get through a difficult period.
   • You should also explain how and when you expect to pay them back. If you are not sure when you are going to be able to pay them back, you should explain this too.
   • You should be aware that borrowing money from family or friends can negatively impact your relationship.
4. Have your loan reinstated. If your loan is already in default, which means that you have not made a payment within a certain period of time and your lender is taking legal action against you, you may still be able to get your loan reinstated. This means that your lender allows you to bring your loan current by paying your back payments and fees. Most lenders only allow you to “cure” a default on a one time only basis.
   • Some states legally provide the right to reinstate your defaulted loan. Your state’s consumer protection agency should be able to tell you whether your state has laws regarding loan reinstatement. You can find your consumer protection agency at: https://www.usa.gov/state-consumer.
   • You should also check the terms of your loan to see whether your agreement allows for reinstatement even if the right is not provided by your state.

Refinancing or Modifying the Terms of Your Loan

1. Refinance your loan. If you are having difficulty repaying your car loan or mortgage, your lender or another lender may be willing to refinance your loan. Generally, refinancing means that you get a new loan with a longer payoff time or lower interest rate so that your monthly loan payments are less expensive and therefore affordable. Your new loan is used to pay off any outstanding loan. So long as you can make your new loan payments, you are not at risk for foreclosure or repossession.
   • It may be difficult to refinance your car loan, unless the lender is willing to extend out your payments. For example, if your original loan was supposed to be paid off in 3 years but your loan company is willing to extend your payments to 5 years, you can lower your monthly payments.
   • Over the life of the loan you will be paying more to the creditor. However, in the short term your car won’t be repossessed.
   • When deciding whether to refinance, it is important to ask your lender what costs or fees will be associated with the refinanced loan and whether your have to pay those fees up front.
2. Seek a home loan modification. If you are having difficulty making payments, you can apply for a home loan modification from your lender. Some lenders would rather change the terms of your loan rather than go through the foreclosure process. You must contact your lender and ask what the process is for applying for a home loan modification.
   • If your loan modification application is submitted at least 15 days before the scheduled foreclosure sale date, a lender must review you application. If you are approved for a modification, the lender cannot foreclose unless you decline or breach the terms of the modification.
   • Applying for a modification can delay foreclosure since several states and the federal government have enacted laws that prohibit the lender from proceeding with foreclosure until it has made a decision on your application. These states include: California, Nevada, and Minnesota.
3. Negotiate a forbearance agreement. If you are unable to make your loan payments for a temporary reason, such as you have not yet started a new job, you should contact your lender and apply for a loan forbearance. While some lenders have forbearance programs already in place, other lenders may be willing to negotiate a temporary period during which you do not repay your loan. Once this forbearance period is over, you are expected to restart your loan payments.
   • Many lenders are willing to offer loan forbearance for a temporary hardship in order to avoid the costly and time consuming process of repossession.
   • You can check your lender’s website to see whether they have forbearance information online. If not, call your lender and discuss your options for a temporary hardship forbearance.
4. Apply for government assistance loan programs. The federal government has several programs to assist homeowners who are having difficulty making their mortgage payments. These programs may lower your payment based on your income, help you develop a plan to repay missed payments, or refinance your loans.
   • The Home Affordable Modification Program (HAMP) is a government-sponsored program that gives homeowners a way to lower their payments on their first mortgage.
   • The Department of Housing and Urban Development (HUD) provides free counseling and assistance for people who are having difficulty making their mortgage payments. You can contact an approved HUD counselor by phone at: 888-995-4673.
   • The federal Home Affordable Refinance Program (HARP) helps people, who have equity in their home, to refinance their mortgage.

Filing for Bankruptcy

1. Evaluate your overall financial situation. Before filing for bankruptcy, you need to look closely at your overall Measure Your Financial Health and create a budget. In order to decide whether bankruptcy is your best option, and if so, what bankruptcy is best, you need to know: whether you will be able to pay any of your bills; whether selling some of your assets will help you regain financial stability; the amount of income you have coming in; and whether you can pay any restructured loan payments. For some people, filing bankruptcy may be able temporarily stop:
   • Repossession of your car and other property used as collateral for a loan.
   • Collection actions for the amount owed to a lender to satisfy the difference between an outstanding loan and the amount the lender collected from selling your property (known as a deficiency balance). For example, in some states, a borrower will be responsible to pay the difference between the balance on their mortgage (ex. $100,000) and the amount the lender received from selling their home ($80,000); the deficiency balance in this example is $20,000 and the borrower would be responsible for repaying this amount.
   • Lawsuits to recoup deficiency judgment (the amount a court ruled that you owe to the lender).
2. Consider what type of bankruptcy is best. Generally, individuals tend to file for two types of bankruptcy, either Chapter 7 or Chapter 11. The main difference between these two bankruptcy plans is whether you have income to pay restructured debt (where a lender changes your payment responsibilities so you can make your payments) or you do not have adequate income and want to sell your assets to payoff as much debt as you can.
   • Chapter 7 bankruptcy, known as liquidation bankruptcy, may be the right choice for you if you have trouble paying your bills, you have a low income and you are willing to sell your assets to payoff your creditors.
   • It may also be a good choice if you are only looking to stall the foreclosure process but not actually keep your home. Chapter 7 bankruptcy allows you to remain in your home without making payments for a limited amount of time, which may allow you to put money aside to rent a property.
   • With Chapter 7 bankruptcy you will no longer be liable for the mortgage payments nor will you be responsible for a paying any deficiency judgments.
   • In order to keep your car under Chapter 7 or Chapter 13 you will have to make some type of agreement regarding payment.
   • If you want to keep your home and you have an income, Chapter 13 bankruptcy may be the right choice for you.
   • Under Chapter 13 bankruptcy, your debt is restructured, which means that over a period of three to five years you will be required to repay a portion of your total debt, including any delinquent mortgage payments.
   • By negotiating the payment of overdue mortgage payments and making future payments, you will be able to remain in your home and avoid foreclosure.
3. File for bankruptcy. If you choose to file for bankruptcy, you should hire a Choose a Bankruptcy Attorney. The bankruptcy process is very complex and whether you are filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, you will be required to do all or some of the following:
   • Analyze your debt and determine your income.
   • Have all of your property properly valued.
   • Complete bankruptcy forms, which includes financial disclosures and repayment or liquidation plans.
   • File your legal forms and documents in the proper court.
   • Attend court hearings and meetings with your creditors.
   • Make payments if you are filing for Chapter 13 bankruptcy or payoff certain creditors with the sale of your assets.
   • When the bankruptcy repayment plan is complete (Chapter 13) or you have paid off or discharged all of your debts, you can petition for your bankruptcy discharge. This legal document states that you are no longer legally obligated to repay any remaining unsecured debts (debt for which there is no collateral; a mortgage is a debt secured by your home; a credit card bill is unsecured debt).

Tips

• If you are concerned that you are unable to make a payment, contact your lender immediately. Lenders are often able to provide you with more repayment or forbearance options before you miss a payment then after your default on your loan.

Related Articles

• Get Out of Debt

References

See also

• Get Mortgage Clients
• Become a Mortgage Broker in Colorado
• Get a Construction Loan (US)

What links here

• File Bankruptcy in the United States
• Get Out of Debt
• Avoid the Most Common Reasons for Credit Denial
• Choose a Credit Counseling Agency
• Choose a Debt Management Program
• Get a Quit Claim Deed
• Rezone Property
• Subdivide Property