If you own a car in Massachusetts and find yourself in the unfortunate position of not being able to make car payments and are anticipating repossession, in danger of repossession, or just want out from under the car payments, you need to be aware of your options.
As a disclaimer, keep in mind that the following article is meant to increase your awareness of the many options that may be available to you when you are in the unenviable position of not being able to make payments on your car loan and the following solutions may not be applicable to your individual circumstances. Please contact our Massachusetts offices to gain further insight if you find yourself in this situation.
When Your Paycheck is Less Than Your Payments
There are a number of options that Massachusetts auto loan customers have when they find themselves without enough money to meet their debt obligations, as follows:
Pay Off the Debt in One Lump Sum
Call Loan Officer of Bank to Negotiate or Refinance
Consolidate Debt with Other Debt
Reach a Debt Settlement
Offer a Voluntary Repossession
Allow Repossession to Occur
Bankruptcy in Chapter 7 or Chapter 13
OPTION 1: The Obvious Solution – Pay Off the Debt in One Lump Sum
While paying off the debt in full is probably your best option, it is likely not possible if you’ve made it this far in this article because you can’t afford to make the car payment in the first place. However, if it is at all possible to acquire sufficient funds to payoff the loan in full, you would be free of the debt and other headaches.
OPTION 2: Pick Up the Phone – Negotiate or Refinance the Loan
It is sometimes possible, particularly if the reason that you cannot currently make payments on your car loan is related to a temporary slump, to negotiate or refinance your auto loan with the bank or lender.
Negotiating a Car Loan
Depending upon how many payments are missed, how much money is owed on the vehicle, and your current and future financial circumstances, you may be able to convince a bank or auto loan lender to allow you to payoff late fees, penalties, and missed payments over a period of time by making temporary increases on your monthly payments.
Refinancing a Car Loan
While the ability to refinance a car loan will vary widely from lender to lender, it is possible to accomplish a refinance of a car loan under certain circumstances.
OPTION 3: Consider Debt Consolidation
If you happen to have other debt and believe that your current financial difficulties are only temporary, it may be possible to persuade a lender payoff your car loan for you, thus consolidating your loan with that new lender. Being able to achieve a debt consolidation, again, will depend a great deal on your current financial circumstances. For example, if you are up to date on your car loan payments (or not to far off of schedule with these payments), have reasonable credit, and steady income now and going forward, you very well may be able to persuade a current lender to take on your debt or to work with a debt consolidation company who will arrange such a takeover for you.
OPTION 4: Consider Debt Settlement
If your financial situation is currently bleak or appears that it will be poor going forward, it may be possible to negotiate with a lender to reduce the total balance owed. Sometimes, if debt settlement is done right, you will be able to reduce the total amount owed to within 20-75% of the original amount owed. Contact our offices for assistance with debt settlement if you are a Massachusetts resident. Keep in mind that you do have the option to work with a debt settlement company, however, these companies work on a percentage basis.
OPTION 5: Voluntary Repossession
When things look really bad, so bad that you cannot make a payment or just want to get out from under the loan, voluntary repossession is one option. This option is actually a bit more complex than it sounds. If you are going to give your vehicle up to the bank or lender for repossession make sure you do the following: (a) get a signed document indicating that your loan has been forgiven, (b) ensure that your credit report will be marked ‘closed-paid’ and that your credit report will show no delinquency or repossession, and (c) that you receive a waiver for your repossession fee.
Our office can assist you with ensuring that a voluntary repossession for a Massachusetts car, truck, or motorcycle goes smoothly.
OPTION 6: Let the Repossession Happen
If you know ahead of time that repossession is going to occur, it is my opinion that having more control over the process is ideal (see voluntary repossession). However, there are times when attempts to negotiate with a lender fail or the lender simply goes ahead and repossesses anyway. If your car is repossessed, keep in mind that there are very specific rules that the lender or bank must follow under Massachusetts law. When a bank or lender fails to follow these rules, you may have some wiggle room to get your car back, or you may be able to argue that you do not owe the remaining deficiency from the loan. Please take a moment to read the rules regarding Massachusetts auto repossessions here:
Rules of Repossession of Car, Truck or Motorcycle in Massachusetts: MGL Chapter 255 Section 13J
Getting Your Car Back
Redemption
When the vehicle is repossessed, you have 21 days from the repossession to redeem the debt and get your car back, or until the car is disposed, or there is a contract regarding the disposition of the car. Redemption, in this context, means to pay off the entire amount owed on the vehicle.
Reinstatement
If the car had not been previously repossessed, you can have the loan reinstated by making a lump sum payment of all missed payments and fees.
The Deficiency
Massachusetts repossession laws allow lenders and banks to charge you for the deficiency associated with a vehicle repossession. In Massachusetts, the deficiency is calculated by the following formula:
Deficiency $ = Loan Balance – (Sale Price (at fair market value) + Repossession Fees + Storage Fees (if any))
If the total deficiency is less than $2,000, under Massachusetts law, the bank or lender cannot pursue you for this amount. However, the bank or lender will sue you for the remainder of the deficiency if the amount owed in greater than $2,000.
Defenses to a Suit
Procedural Defenses
Breach of the Peace – Repossession companies must follow very specific rules when repossessing a vehicle in Massachusetts. If you have concerns over the manner in which the repossession company recovered your car, truck or motorcycle, give our office a call to find out if you have a case.
Improper Notification – Banks or lenders conducting a repossession in Massachusetts must follow the rules regarding notification precisely, or risk a defense to a suit over the amount you might owe in deficiency. For example, proper notice includes your receipt of written notice of a document entitled, “Rights of Defaulting Buyer under the Massachusetts Motor Vehicle Installment Sales Act.” This document must be sent to you 10 days after nonpayment, and the lender must give you 21 days to catch up during the default cure period. This document is also not valid if it fails to contain a due date and amount due.
Missing Personal Property – If, as a result of the repossession, you are able to prove that property that was in the motor vehicle is now missing or has not been returned to you, you may be able to have the value of that property replaced, have the property returned to you, or have the deficiency offset by the value of this property.
Military Service – Certain protections exist for military members who are active duty and potentially for other military personnel depending upon the status.
Poor Math Skills
Yes, that is correct, the attention you paid in high school may just well pay off here. Contact our office if you believe that the deficiency balance was incorrectly calculated. Often, the error in deficiency calculations occurs when the interest rate on the loan does not match that listed in the notice, or a late fee is calculated for payments that were actually made, the repossession or storage fees listed on the notice are unreasonable, or attorney’s fees are included in the deficiency balance.
Failure to Make a Phone Call
While this may not break the case wide open, the Massachusetts law on repossession requires a car loan lender or bank to have the repossession company contact the police within 1 hour of repossessing the car, truck, or motorcycle.
NOTE: We want to see your deficiency notice, notice of default, or other notices provided to you during the repossession process. Again, the bank or lender’s failure to property adhere to the notice and other requirements described in Massachusetts law may work in your favor in both negotiations and settlement and in court. Do not be concerned about paying our attorney as this type of case will typically be conducted with a contingency fee, meaning, we will not be paid until you receive the results.
Final Concerns
If none of these options work for you or you are interested in considering your options to file under the Bankruptcy laws and you live in Massachusetts, please give our office a call.