26 Aug 2021   /   0 comments

Can I File Bankruptcy on a Car Title Loan?

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Bankruptcy on Car Title Loan

You work hard, but it always seems like living costs more than you make. When you’re faced with a financial crisis, you might not have the time or credit score to go the traditional route of a bank loan. It can take several days or a week to secure a bank loan.

A car title loan can be secured the same day and put much-needed cash in your pocket within hours. However, as you pay off your car title loan, you might find that your financial situation doesn’t improve.

A bad financial situation can lead many people to consider filing for bankruptcy to get out from underneath a mountain of debt. But what about your car title loan? You wonder, can you file bankruptcy on a title loan? This guide can help you understand the car title loan and bankruptcy better.

What Is a Car Title Loan?

When you need money quickly, you can go to a title loan company and secure a car title loan. The company loans you money based on the value of your vehicle, and they hold a lien on your car or truck while you pay the funds back along with interest.

You make your payments over an agreed-upon period. After you pay the money and interest to the company, they return the title of your car without a lien back to you.

In many cases, the car title loan company doesn’t require a background check. They can also provide you with money the same day, and the process only takes a short period of time. However, you do need to own your car and have a clean title.

What Is Bankruptcy?

When you’re overwhelmed by debt without any way of possibly repaying it, you can file for bankruptcy. This is a legal process that can help you by offering relief from your debts. Bankruptcy is an option for both individuals and companies.

There are a couple of types of bankruptcy that you can file for with the courts: Chapter 7 and Chapter 13. With Chapter 7 bankruptcy, the court wipes away most of your debts and gives you a fresh while Chapter 13 provides relief from some of your debts and creates a more reasonable repayment plan for the remaining money owed.

When you file for bankruptcy, you’ll probably need to hire an attorney, and the request for bankruptcy is filed at your location, no matter where your creditors are located.

There is a cost associated with a bankruptcy case. You’ll need to pay the attorney fees and also a filing fee with the courts. A judge will look over your finances from your income and assets to your monthly bills and creditors.

The judge makes the final decision on whom you repay and who you don’t along with how much of a debt you need to repay.  There are no guarantees when you file for bankruptcy.

Car Title Loans and Bankruptcy

When it comes to a car title loan and bankruptcy, it’s similar to your mortgage. You’ve used an asset as collateral for the loan, so most car title loans remain intact throughout the bankruptcy process.

You wouldn’t expect to own your home free and clear after a bankruptcy, and the same thing applies to a car title loan. The bankruptcy process might affect your payment amounts or the length of the repayment, but it more than likely won’t wipe it away.

In some cases, as the result of filing bankruptcy, you might need to surrender the vehicle wants the bankruptcy is discharged. You do have the option of not including the car title loan in your bankruptcy.

The truth is that the title loan company doesn’t want to repossess your car. It’s a hassle. They have to file the appropriate paperwork, clean it up, and find a buyer who is willing to pay at least the amount owed on the car title loan.

They’d much rather have you make the payments and get your car title back once you’ve paid off the amount owed plus interest. If you find yourself in a bind, it’s always a good idea to communicate with the auto title loan company.

Benefits of a Car Title Loan and Reasons to Meet Your Obligations

When you need money fast, you might consider a car title loan. However, you have concerns and want to know that there are real benefits for choosing this option and meeting your obligations of a car title loan.

Fast Process

With a car title loan, you can usually go through the loan process in less than an hour, and in some cases, around 30 minutes, if you have all your documents ready and complete. These documents include:

  • Car title
  • Vehicle registration
  • Personal identification
  • Proof of residency
  • Proof of insurance
  • Financial documentation
  • Personal references

These documents help make the process run more smoothly.

Keep Your Vehicle

A car title loan means you keep your car while you pay off the money and interest that you own. If you sold your car for quick cash, it’d be gone. It’s important to note here that a car title loan is an obligation.

If you don’t make your payments or file bankruptcy on the title loan, you may lose your vehicle. Also, the repossession of the vehicle might lead to additional fees and expenses that you’ll need to repay at some point.

No Credit Check

Most auto title loans can be issued without a credit check. Essentially, your vehicle is your credit. This can also help to protect your credit because hard inquiries on your credit score can actually lower it.

Same-Day Funding

When you go the traditional route for borrowing money, you can expect to wait a few days or a couple of weeks to get the cash you need. Most car title loans can offer you cash on the same day.

Bankruptcy is a valuable tool to help people in dire circumstances get out from underneath their crushing debt. However, bankruptcy won’t necessarily release you from the obligations of a car title loan. You can always opt to leave the car title loan out of your bankruptcy and protect your vehicle.

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