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What Happens to My Charged-Off Auto Loan During Bankruptcy?



When it comes to a charged-off auto loan, what happens to your car and the loan during bankruptcy depends on the status of your auto loan, which bankruptcy you choose, and your willingness to pay in order to keep the vehicle.

Charged-Off Car Loans

Charge-offs are unpaid debts that get classified as “bad debt” after multiple missed or late payments or unsuccessful attempts from the creditor to collect. A charged-off debt is one that the lender has removed from their books and subsequently closed the account.

A charged-off car loan, like a charged-off debt, is sold by the original lender. However, just because it’s charged off doesn’t mean you’re no longer responsible for paying it. The loan is typically sold or transferred to another lender or to a collection agency, and they attempt to collect the debt from you.

Some auto loans can be charged off without the vehicle being repossessed. Not all charge-offs are associated with repo, and things can get complicated when it comes to bankruptcy.

Bankruptcy and Charge-Offs

What Happens to My Charged-Off Car Loan During Bankruptcy?When it comes to a charged-off car loan, whether you want to discharge the debt during bankruptcy or not, you must include it in your paperwork when you initially file. To do this, you have to list the debt as either secured or unsecured.

If you have a charged-off auto loan and you file bankruptcy, the debt could be discharged if the vehicle is repossessed. Car loans are secured debts, and the vehicle itself is what secures it. When you promise to repay the auto loan, you agree that the lender can take possession of the car through repossession if you default.

Once a vehicle is repossessed, any leftover loan balance after they sell the car is unsecured, which means it can usually be discharged during bankruptcy. Most unsecured debts and loans, such as credit card debt, qualify to be discharged if they’re not repaid by the end of bankruptcy.

If your auto loan has been charged off but you still have the vehicle, then you may be able to keep the car depending on the Chapter of bankruptcy you file.

Charged-Off Car Loan in Chapter 7

If your car loan was charged off but you still have the vehicle, it’s considered a secured debt. Since the title is in your name because the car hasn’t been sold by your lender, the entire loan balance is a secured debt and you note this on your bankruptcy forms.

If you want to keep the vehicle that’s still secured, then you need to reaffirm (keep making payments) or redeem the auto loan (pay for the car’s value in full). However, reaffirming is typically only possible if you’re current on the loan, and a charged-off auto loan means you’re not current – so redemption is likely your only choice if you want to keep the vehicle.

If the loan is charged off and the lender repossessed the car, the loan balance is now unsecured. Any loan balance not recovered by the sale of the vehicle is now a deficiency balance, and it can typically be discharged, along with most other unsecured debts in Chapter 7 bankruptcy.

Charged-Off Car Loan in Chapter 13

If you file Chapter 13 bankruptcy, you may be able to keep paying on the loan and keep the car even if the loan is charged off. If the vehicle was repossessed, you may even be able to get the car back. However, to get it back, you likely need to pay off the loan in full, according to the legal site

Another option you might have is to cram down the loan and pay only the fair market value of it. A cramdown involves lowering your loan balance to your vehicle’s value. If your loan is in a negative equity position, meaning you owe more than it’s worth, you may be able to cram down the loan and establish a payment plan that involves only paying for the car’s value. This could save you a lot of money on the auto loan and if you meet the requirements.

Another option is surrendering the vehicle to the lender (voluntary repossession) and using its auction proceeds to lower the loan amount. And, because the loan is no longer secured by the car, it can be discharged along with your other debts at the end of your Chapter 13.

Bankruptcy Aftermath

After bankruptcy, you’re usually in a much better financial position than when you started. Most unsecured debts typically get discharged, and your finances are usually in better shape overall. However, your credit score may be worse for wear.

Your credit reports can reflect a bankruptcy for up to seven or 10 years, depending on what type you filed. With a bankruptcy on your credit reports, it can make it hard to qualify for another auto loan even when your bankruptcy is discharged and completed. But there are lenders that can assist post-bankruptcy borrowers, called subprime lenders.

Subprime lenders specialize in helping with tough credit situations, such as charged-off car loans, past repossession, and bankruptcy. Finding these lenders, though, can be a little tricky since they don’t usually stick out in the crowd of lenders and dealerships – we want to help with that.

Here at Auto Credit Express, our aim is to connect borrowers to dealers that are signed up with bad credit lending options. To get matched to a dealership near you that can assist borrowers with poor credit and unique credit situations, fill out our free auto loan request form. We’ll get right to work looking for a dealer in your local area!

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Loans Bad Credit Online – Loans Bad Credit Online – Reforming India’s deposit insurance scheme | Fintech Zoom | Fintech Zoom



Loans Bad Credit Online – Loans Bad Credit Online – Reforming India’s deposit insurance scheme | Fintech Zoom

Loans Bad Credit Online – Loans Bad Credit Online – Reforming India’s deposit insurance scheme | Fintech Zoom

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Loans Bad Credit Online – Reforming India’s deposit insurance scheme | Fintech Zoom



The government’s incentive to step in and bail out depositors when banks fail is clear from past experience.

By Anusha Chari & Amiyatosh Purnanandam

The failure of the Punjab and Maharashtra Co-operative Bank (PMC) in September 2019 shone a light on the limitations of India’s deposit insurance system. With over Rs 11,000 crore in deposits, PMC bank was one of the largest co-op banks. That the Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance covered depositors, provided little solace when the realisation hit that the insurance amounted to a mere Rs 1 lakh per deposit.

The predicament of PMC depositors is, unfortunately, not an anomaly. Several bank failures over the years have severely strained RBI and central government resources. While co-operative banks account for a predominant share of failures, other prime examples include the Global Trust Bank and Yes Bank failures. These failures entail a direct cost to the taxpayer—the DICGC payment or a government bailout. More importantly, bank failures impose long-term indirect costs. They erode depositor confidence and threaten financial stability, presenting an urgent need for deposit insurance reform in the country.

A sound deposit insurance system requires balancing two opposing forces: maintaining depositor confidence while minimising deposit insurance’s direct and indirect costs. At one extreme, the regulator can insure all the deposits, which will undoubtedly strengthen depositor confidence. But such a system would be very expensive.

A bank with full deposit insurance has minimal incentive to be prudent while making loans. Taxpayers bear the losses in the eventuality that risky loans go bad. Depositors also have little incentive to be careful. They can simply make deposits in the banks offering high interest rates regardless of the risks these banks take on the lending side.

Boosting depositor confidence and reducing direct and indirect costs require careful structuring of both the quantity and pricing of deposit insurance. Some relatively quick and straightforward fixes could help alleviate the public’s mistrust while improving the deposit insurance framework’s efficiency.

India has made some progress on this front over the last couple of years. First, the insurance limit increased to `5 lakh in 2020. Second, the 2021 Union Budget amended the DICGC Act of 1961, allowing the immediate withdrawal of insured deposits without waiting for complete resolution. These are very welcome moves. Several additional steps could bring India’s deposit insurance system in line with best practices around the world. Even with the increased coverage limit, India remains an outlier, as the accompanying graphic shows.

The government’s incentive to step in and bail out depositors when banks fail is clear from past experience. However, these ex-post bailouts are costly. The bailout process also tends to be long, complicated, and uncertain, further eroding depositor confidence in the banking system. A better alternative would be to increase the deposit insurance limit substantially and, at the same time, charge the insured banks a risk-based premium for this insurance. Under the current flat-fee based system, the SBI pays144 the same premium to the DICGC—12 paise per 100 rupees of insured deposits—as does any other bank!

A risk-based approach will achieve two objectives. First, it will ensure that the deposit insurance fund of the DICGC has sufficient funds to make quick and timely repayments to depositors. Second, the risk-based premia will curb excessive risk-taking by banks, given that they will be required to pay a higher cost for taking on risk.

India is not alone in trying to address the issue of improving the efficiency of deposit insurance. The Federal Deposit Insurance Corporation (FDIC) recognizes that the regulatory framework governing deposit insurance is far from perfect and the United States is moving towards risk-based premia. The concept is similar to pricing car insurance premia according to the risk profile of the driver. The FDIC computes deposit insurance premia based on factors such as the bank’s capital position, asset quality, earnings, liquidity positions, and the types of deposits.

In India, too, banks can be placed into buckets or tiers along these different dimensions. The deposit premium can depend on these factors. It is easy to see that a bank with a worsening capital position and a high NPA ratio should pay a higher deposit insurance premium than a well-capitalized bank with a healthy lending portfolio. The idea is not dissimilar to a risky driver paying more for car insurance than a safe driver.

Risk-sensitive pricing can go hand-in-hand with the increase in the insured deposit coverage limits bringing India in line with its emerging market peers. In a credit-hungry country like India, these moves would build depositor confidence, possibly increasing the volume of deposits and achieving the happy result of the banking system channeling more savings to productive use.

Chari is professor of economics and finance, and director of the Modern Indian Studies Initiative, University of North Carolina at Chapel Hill and Purnanandam is the Michael Stark Professor of Finance at the Ross School of Business, University of Michigan

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5 Signs You’re Not Ready to Own a Home, According to a CFP



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The housing market has boomed over the last year, despite a global pandemic and millions of Americans struggling to make ends meet. 

Many people are spending less on entertainment, clothing, travel, and other discretionary purchases during COVID. Federal student loan borrowers have seen temporary relief from their loan payments. These expenses will most likely rise again after the pandemic, and many people who committed to a new home with a large mortgage will struggle to keep up. 

I often speak with clients and prospective clients who want to buy a home before they have a strong financial foundation. Buying a home is not only one of the largest purchases you’ll make in your lifetime, but it’s also a huge commitment that’s extremely hard to undo if you have buyer’s remorse

It’s important to make a thoughtful, informed decision when it comes to a home purchase. Before you take the plunge into homeownership, check for these signs that you’re not quite ready to buy. 

1. You have credit card debt

Credit card debt can be a drain on your monthly budget, and when combined with student loans and a car loan, it can lead to high levels of stress. 

Generally, more debt means higher fixed expenses and little opportunity to save for long-term financial goals. Your financial situation will only get worse with the addition of a mortgage. I always recommend that clients be free of credit card or other high-interest debt before they consider buying a home. 

To rid yourself of credit card debt, take some time to get a good handle on your cash flow. Take an inventory of your spending over the last six to 12 months and see where you can cut back. From there, develop a realistic budget that includes aggressive payments to your credit cards. 

There are several strategies to help you knock out credit card debt fast. Regardless of the method you choose, stick with the plan and track your progress along the way. Once you pay off your credit cards, you can allocate your debt payments to savings, which can help you avoid this situation in the future.  

2. You have bad credit

Bad credit is not only a sign that you may not be ready to take on a mortgage, it can also signal a high risk to

mortgage lenders
. A high-risk status results in higher interest rates and more strict requirements to qualify for a loan. A mortgage is one of the largest loans you’ll take out in your lifetime, and if you get behind on payments, you could lose your home. 

Just as with credit card debt, bad credit could be a result of past financial mistakes. Dedicating the time to repair bad credit and improve your credit score will help you beyond purchasing your dream home. 

Start by pulling a recent credit report from each of the three credit bureaus so you can review it for errors. Dispute any errors, address past-due accounts, and bring your overall debt balances down. It’s helpful to learn what has a negative effect on your credit score so you can avoid these mistakes in the future. 

3. You don’t have an emergency fund (or an inadequate one)

If you’re unable to save for a rainy day, you probably don’t have enough money to buy a house. Owning a home is a big responsibility, and unexpected expenses pop up all the time. In addition, you could lose your job, have a medical emergency, or another unexpected expense unrelated to the home. Maintaining an emergency fund is a good sign that you have discipline and are prepared for the responsibility of homeownership.

Many financial experts recommend saving at least six months of living expenses in an emergency fund. If you have variable income, own a business, or own a house, you should save more. To build an emergency fund, set money aside from each paycheck and automate transfers to make the process easier. Give your emergency fund a boost when you receive lump sums such as bonuses or tax refunds. Start by saving one month of living expenses and build from there. 

4. You don’t have separate savings for your home

I always advise clients to set aside savings for a home in addition to an emergency fund. It’s a bad idea to start homeownership with no savings. Whether you have unexpected expenses related or unrelated to the home, having no emergency fund after a home purchase will lead to unnecessary stress — and possibly more debt. 

When purchasing a home, you’re responsible for a down payment and closing costs. While a 20% down payment is ideal to avoid private mortgage insurance, a down payment of at least 3.5% is typically required. Closing costs can range from 2 to 5% of the home’s value. 

Also, you will have moving costs, costs to spruce up your new place (like new furniture or light cosmetic updates), and any initial maintenance and repairs. Be sure to budget for these items to know how much to save on top of your emergency fund. It doesn’t hurt to boost your emergency fund, too, in preparation for homeownership. 

5. You have a low savings rate

It’s much easier to develop good savings habits before you have a lot of responsibilities. To get on track for financial independence, several studies show that you should save at least 15% of your income. The longer you wait, the more you’ll need to save. 

If your savings rate is low before you purchase a home, it will most likely worsen after becoming a homeowner. Even if your mortgage is similar to your rent, ongoing maintenance and repairs, higher utilities, and homeowners association fees can wreak havoc on your budget. 

Take a look at your current savings rate and see if you’re on track for financial independence. If you’re saving less than 15 to 20% of your income, work to improve your savings rate before you consider buying a home. A strong savings habit can help you build your home savings fund faster and ensure that a home purchase doesn’t impede your long-term financial goals. Finally, understand how much house you can afford so you can avoid being house poor. 

Buying a home can be rewarding, and when done the right way, it’s a way to build wealth. Before you decide to buy a home, it’s important to understand your numbers and ensure that you’re ready for the commitment. Without preparation, your dream home could be detrimental to your long-term financial goals.

Chloe A. Moore, CFP, is the founder of Financial Staples, a virtual, fee-only financial planning firm based in Atlanta, Georgia and serving clients nationwide.

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