My car was repossessed and now I owe $9,600 in a deficiency balance I can't afford to pay. Is bankruptcy an option?
I filed bankruptcy 7/08 in North Carolina. I lost the car I had, purchased another car, was on a very tight time frame to do so, went to a car lot my lawyer suggested. The salesman looked at my information, the bank told me what I could afford to pay monthly and I picked a car. Unfortunately, I was trying to recover from the bankruptcy and the payment was too high. I struggled with the payment from 7/08 until 4/09. I voluntarily relinquished the car back to tidewater motor credit. They auctioned the car and I owe $9,600. They continue to call and harass me, and I don't know what to do. Can they garnish my wages or if a judgment is placed how bad will that affect me? I'm a single woman feeling overwhelmed with the loss of a relationship, bankruptcy, and now this car loss.
Part of my answer contains some "tough love," so I want you to be prepared to read something you may not want to.
Let us handle the immediate issue first. When you surrendered the car to the creditor, it sold the car for less than the balance of your loan. This is called a deficiency balance. Read your loan documents to see what you agreed to regarding a deficiency balance. According to the North Carolina DOJ Web site, it is legal for the creditor to ask you to pay the deficiency balance in your state.
What can you do about this?
If you had purchased this car before the bankruptcy, it might be possible for your bankruptcy attorney to ask the court to reopen your case and add the car loan to the bankruptcy. However, because you purchased the car after your bankruptcy, I believe it would be all but impossible to add this to the bankruptcy. However, I am not your attorney, and this is a question you should ask him or her.
On a similar note, I do not believe that filing a new bankruptcy petition will be available to you, given that you filed a little more than a year ago. Bankruptcy is designed to be rare event, and not an annual subscription. However, if you were beset by an unexpected calamity the court may allow you to file a second bankruptcy after such a brief period. Again, that's a question for your attorney to ponder.
For the sake of argument, let us assume you cannot file for bankruptcy again. What do you do with the $9,600 deficiency balance? Talk to the creditor and work out a payment plan. They may make intimidating statements that frighten you. Arm yourself with strategies and tactics to level the playing field by understanding debt negotiation techniques. Debt Negotiation and Settlement Advice is a good Bills.com article to get you started.
If you do nothing, North Carolina is a state that bars creditors from garnishing wages, so at least you will be able to keep 100% of your income. However, creditors can go to court, and in a hearing before a judge that you will be summoned to attend, ask the judge for an order to levy your bank accounts or put a lien on your property. This means that although your income might be safe, anything else of significant value the court finds might not be.
This leads me to the tough-love part of my reply. Your circumstances (bankruptcy followed by buying a car you can't afford, then voluntary repossession and a $9,600 deficiency balance) and the last sentence in your message lead me to believe that you do not have a handle on your finances. To the contrary, your finances are controlling you. Stop being a passive observer of your money. Take control of your spending by creating a budget and sticking to it. Had you been in control of your budget you would have known the car you wanted was too expensive, and not took the bank or salesman's word for it that the car was affordable.
There are many ways to create a personal budget. It's like dieting -- pick a budgeting style or plan that works for you, but once you start stay on your plan! Bills.com has a free budget guide that you can download and print. This might be the right style for you, or not. But either way, create a budget, take control of your money, and you will never be in your present situation again.
One last thought. Join a local group that focuses on personal finance. I have a family member who joined one at her church recently. She said being with others who wrestle with personal finance issues is helpful because, 1) she gains knowledge about saving and spending, and 2) she socializes with others sharing that interest.
You can and will work your way out of this. I hope this information helps you Find. Learn & Save.
Dealing with debt
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2022 was $16.91 trillion. Housing debt totaled $12.26 trillion and non-housing debt was $4.65 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Each state has its rate of delinquency and share of debts in collections. For example, in New Jersey credit card delinquency rate was 3%, and the median credit card debt was $430.
To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.
Your paying for your father's medical care is understandable if the alternative is the hospital denying him care. Regarding your question about the amount of time that must elapse for chapter 13, the rule is fairly simple: A chapter 13 discharge will be granted if two years have elapsed from prior chapter 13 cases and four years for prior chapter 7, 11 and 12 cases. Of course, that assumes the prior plans were completed, as is the present plan. See the US Courts Web page Chapter 13 basics. Just about any consumer debt can be discharged in bankruptcy. The exceptions include student loan debt (except under narrow circumstances), child support, and instances of fraud.