The auto Web site Jalopnik published an investigative report on the predatory behavior of Credit Acceptance Corporation, a subprime auto-loan company with a poor reputation. The story focuses on debtors who signed auto-loan agreements as far back as the 1990s but are still being hounded by the lender decades later and after wage garnishments. The lesson is that debtors in these kinds of circumstances are much better off talking to an experienced New York bankruptcy lawyer than paying and paying and paying.
The opening story was an auto worker who paid $3,000 down on a $12,500 vehicle, financing the rest with a 22-percent loan. The borrower became sick and defaulted on the loan. The lender repossessed the vehicle and then extracted payments from the debtor for decades after the car would’ve been scrapped.
Other borrowers told similar stories. One even co-signed a loan for a family friend who promptly disappeared, leaving all the payments on her.
Eventually, some of these borrowers filed bankruptcy, but when they did it was much, much later than they should have. Here are some alternatives for debtors in similar situations.
- If you have poor credit, but at least enough for a down payment, you are much better off buying an old used car. Yes, the older a car is, the more likely it’s going to suffer a catastrophic engine failure, but consider the options: If you pay $5,000 for a vehicle and then another $2,000 for engine repairs, it’s better than paying tens of thousands of dollars in garnished wages for a car that was dismantled decades ago.
- It’s hard to decide when a small problem in life, like a two-month life-threatening illness, is going to be enough to file a bankruptcy over. It’s possible some of these debtors could’ve paid down their loans if misfortune hadn’t intervened. However, once you’ve defaulted on a loan—any loan—bankruptcy is a serious option.
- New York City and Long Island have strong if not always reliable public transit networks. Thus, if you have poor credit, then considering that, or a bicycle or a scooter of some kind, will probably take you further longer than a subprime auto loan.
- Finally, if you need a car to get to work, then seriously consider either moving or changing jobs. It can take you away from work you enjoy or people you prefer living near, but no one ever complained about missing a long, tedious commute. Another way to split the difference is carpooling.
The Jalopnik article is here.
It’s expensive to be poor in the U.S., but if you took out a high-interest auto loan and can’t keep up on the payments, then talk to an experienced New York bankruptcy lawyer before paying the lender for another 25 years.
For answers to more questions about bankruptcy, auto loans, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.
