BILL'S ANSWER
Your mother needs to consult with an attorney licensed in your state to determine what action this creditor can take against her to enforce the debt she is unable to repay. In most states, a creditor can garnish a consumer’s wages, levy his or her bank accounts, or even take action to seize property, as it has threatened in your mother’s case. However, before a creditor can undertake any such effort, it must first file a lawsuit and obtain a court judgment against the debtor. Even if this creditor has a judgment against your mother, I would be very surprised if it would actually try to seize and auction her vehicle. Most states exempt a portion of the value of a vehicle from creditor execution; for example, California consumers can exempt up to $2550 of the equity in their vehicles from their creditors. Before this creditor can auction your mother’s vehicle, it must pay off her current secured auto loan and reimburse your mother for her state exemption. Since many Americans owe more on their vehicles than their property is worth, seizing a judgment debtor’s vehicle is often a losing proposition for creditors, especially considering they usually receive significantly less than the vehicle is worth at a judgment sale. In addition, unsecured creditors, such as those that issue credit cards and personal loans, may not want to seize consumers’ property due to public relations issues; consumers may be hesitant to use credit cards or personal loans if they think that they could lose their home or car in case of default. To read more about your state laws relating to the enforcement of consumer judgments, I encourage you to visit http://www.bcsalliance.com/y_debt_statelaws_garnishments.html
You should know that collection agencies frequently make threats which they often cannot or do not intend to act upon in an effort to convince consumers to pay old debts. As I said, an unsecured creditor cannot seize any property until it has filed a lawsuit and obtained a judgment; despite this fact, few creditors actually choose to pursue legal action against consumers. This creditor is likely making these threats to frighten your mother and make her think that she must pay this debt immediately. Your mother probably has obligations which require much more immediate attention, such as her mortgage, car, and medical bills; unless this creditor has actually filed legal action against her to enforce this debt, your mother should probably use the limited funds she receives each month to pay her higher priority obligations. To make sure that you are making an informed decision regarding how your mother should proceed with this debt, I again encourage her to consult with an attorney in her state to discuss what action this creditor can take to enforce this debt.
Many options exist to assist your mother in resolving this outstanding unsecured personal loan. For example, she could explore a debt settlement program or a consumer credit counseling service. Both of these services provide an option outside of bankruptcy for consumers to resolve debts which they are struggling to repay as required by their original credit agreement. In a worst case scenario, your mother could file for bankruptcy protection; this may be especially helpful if the creditor does pursue legal action. To learn more about the various options available to your mother to help her resolve this debt, I encourage you to visit the Bills.com Debt Help page at http://www.bills.com/debt-help
I wish your mother the best of luck in resolving this debt, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.Bills.com
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You mentioned charge-off, and that may change your situation if the original creditor sold your collection account to a collection agent. Why? Generally speaking, collection accounts are sold for far less than the face-value of the account. For credit card or other unsecured debt, a collection account is sold for pennies on the dollar. A vehicle loan is secured, however, so my guess -- note that word choice -- is that vehicle collection accounts are worth more.
Learn who owns your collection account -- the note on your vehicle. Open a negotiation with that creditor for a lump-sum settlement of the account. Start at 25 cents on the dollar and negotiate from there.