Defaulting on loan repayments can be unavoidable at times. This is especially true in the current uncertain economic climate, where inflation seems to be spiraling out of control. Unfortunately, continued defaults on repayment could lead to you losing your prized asset. New Jersey law gives borrowers many options to protect their assets and their rights. An experienced attorney help you understand your options and strategize debt management.
The first thing to do is inform your lender about your financial challenges. It is beneficial for both parties. Your lender may give you a grace period or even partially waive off the loan. Remember, they can only repossess the asset that was bought using the loan, nothing else. They cannot harm you or the asset under the loan contract for defaulting on debt payments.
In case repossession becomes the only option, the lender will need to follow the proper repossession process by giving you time to exercise your rights freely. Here are the options you have available under the threat of repossession.
Re-Instantiate the Loan
You can exercise this option with the help of your attorney and request the court for a re-instantiation of the loan. You might have to bear some costs, such as processing fees and lender expenses, etc., by the time court gives a go-ahead. In this case, the loan starts again, sometimes after curing the default and at other times by including the defaulted value in the new contract. Your attorney can help here in negotiating the new terms of loan repayment. Lawyers can also help you protect your credit score.
Sell the Asset
A borrower can sell the asset to repay the loan and avoid foreclosure and lender repossessions. The steps to get the selling rights include:
Get your attorney to check whether the legalities of the loan contract permit selling the asset.
Apply for a reselling permit and inform your lender.
Repay the loan after selling the asset and take home any profit you make on the sale.
The challenge here is to first recognize that all assets, such as real estate or vehicles, cannot simply be sold whenever you wish to. This might explain why more than 164,000 properties saw foreclosure filings in the first half of 2022 alone. Additionally, buyers are reluctant to purchase assets with pending loans. In the case of vehicles, the value decreases over time but the loan amount does not. So, the sale might not cover the entire debt amount.
File for Bankruptcy
As a borrower, you can file for bankruptcy to get a stay on repossession. A lawyer can help you choose between Chapter 7 and Chapter 13 bankruptcy. With this, you can get temporary stay orders to prevent the repossession of your assets. When the automatic stay comes into effect, the lender cannot repossess the assets until they file for lifting the stay or the stay duration expires. It gives you time to renegotiate the terms of the loan or even get the remaining loan amount discharged.
Why Do You Need a Lawyer?
An experienced lawyer can help you understand and assess all options available to you. They can also help you navigate through complex judicial compliances. You will need an attorney to present your case before the court. They can do so even in your absence so that court deadlines are not missed, and judgments don’t turn in favor of the lender. Also, an attorney can mitigate the deficiency judgments when the repossession does not cover lender costs.
If you find that loan repayment is becoming difficult for you, the best course of action is to consult an attorney immediately.