Can't Afford Your Car Payment? 7 Real Options That Work

You can't afford your car payment. You're not alone, and you have real options.

Your next move depends on one question: Do you want to keep the car or let it go?

• Want to keep it? You can refinance, negotiate hardship assistance, trade down, or use bankruptcy to free up cash.
• Ready to let it go? You can surrender it, sell it, or file bankruptcy to eliminate remaining debt.

Every option has trade-offs. We'll break down each path so you can choose what works best for your situation.

How To Keep Your Car When Money's Tight

Losing your car isn't inevitable. You can take action now to avoid default and keep your wheels.

Even with bad credit, you can explore these four strategies:

• Refinance the car loan
• Use hardship assistance programs
• Trade down to something cheaper
• File bankruptcy to eliminate other debts

Refinance Your Car Loan

Refinancing replaces your current loan with a new one. You get a different lender and potentially better terms.

The goal? Lower your monthly payment through a reduced interest rate or extended loan term.

Has your credit score improved since you bought the car? Refinancing at a lower rate could save you hundreds monthly.

Even without better credit, extending your loan term spreads payments over more time. Your monthly bill drops, but total interest costs may increase.

Smaller payments help you breathe now. Just understand the long-term cost.

Ask Your Lender About Hardship Programs

Most lenders don't want you to default. They may offer help when you're struggling.

Hardship programs can include loan deferment, payment extensions, or late-fee waivers.

Deferment lets you pause payments temporarily. After the pause ends, you resume payments and your loan extends by the same period.

Interest often accrues during deferment. Your total loan cost may increase slightly.

Late-fee waivers work differently. Pay within 30 days of the due date, and your lender may waive fees. Your credit score stays protected because federal law prevents reporting until 30 days late.

Hardship programs target short-term struggles like job loss or natural disasters. Call your lender today to see what they offer.

Trade Down to a More Affordable Vehicle

Your current car costs too much. Trading for a cheaper vehicle could solve the problem.

Many dealerships let you trade in your car to pay off the loan. Any remaining value goes toward a less expensive replacement.

Positive equity becomes your down payment. Negative equity might roll into a new loan, but watch for higher interest rates.

The math matters here. Calculate whether a cheaper car truly lowers your total monthly transportation costs, including insurance and maintenance.

File Bankruptcy To Free Up Cash for Car Payments

If crushing debt from credit cards, medical bills, or personal loans is draining your budget, bankruptcy can help you keep your car.

Chapter 7 bankruptcy eliminates unsecured debts in 3-4 months. Once those debts disappear, you free up hundreds monthly for essential expenses like car payments.

You can keep your car in Chapter 7 if it's protected by your state's exemptions and you're current on payments. Most states let you exempt several thousand dollars in vehicle equity.

Chapter 13 bankruptcy works differently. You enter a 3-5 year repayment plan that can lower your car payment through a process called cramdown. If you've owned the car for over 2.5 years, you can reduce the loan balance to the car's current value and potentially lower the interest rate.

Both chapters protect your car from repossession while your case is active through an automatic stay.

Check your bankruptcy eligibility to see if this path makes sense for your situation.

How To Let Your Car Go Strategically

Keeping the car may not make financial sense. If the payment is too high or the car isn't worth what you owe, letting it go could be your smartest move.

You have three main options:

• Voluntary surrender (voluntary repossession)
• Sell the car yourself
• File bankruptcy to eliminate the deficiency balance

Voluntary Surrender (Voluntary Repossession)

You can return the car to your lender voluntarily. This is called voluntary surrender or voluntary repossession.

The lender sells the car at auction. If the sale price doesn't cover your loan balance, you owe the difference—called a deficiency balance.

Example: You owe $15,000. The car sells for $10,000 at auction. You still owe $5,000, plus repossession and auction fees.

Voluntary surrender hits your credit report the same way forced repossession does. Both stay on your report for seven years and significantly damage your credit score.

The only advantage? You avoid towing fees and the stress of hiding from repo agents.

Sell the Car Yourself

Selling privately almost always gets you more money than auction. You control the process and potentially avoid a deficiency balance.

If you sell for more than you owe, you pay off the loan and keep the difference. If you sell for less, you need to cover the gap at closing or negotiate with your lender to accept less.

Some lenders accept a short sale,where they forgive the difference between sale price and loan balance. This isn't guaranteed, but it's worth asking.

Selling takes time and effort, but it protects your credit better than repossession.

File Bankruptcy To Eliminate the Deficiency Balance

If you surrender or sell your car and still owe money, bankruptcy can eliminate that debt.

Chapter 7 bankruptcy discharges deficiency balances along with other unsecured debts. Once you receive your discharge, the lender cannot pursue you for the remaining balance.

Chapter 13 bankruptcy includes the deficiency in your repayment plan. You pay a portion (often pennies on the dollar) over 3-5 years, and the rest is forgiven.

If you're already considering bankruptcy for other debts, including your car deficiency makes strategic sense.

Start your free Chapter 7 filing to see how bankruptcy can give you a clean slate.

What Happens If You Do Nothing

Ignoring your car payment doesn't make the problem disappear. Here's what happens if you stop paying without taking action:

After 30 days: Your lender reports the late payment to credit bureaus. Your credit score drops significantly.

After 60-90 days: Your lender can repossess the car without warning in most states. Repo agents can take it from your driveway, workplace, or street.

After repossession: The lender sells your car at auction, usually for less than market value. You owe the difference plus repossession fees, storage fees, and auction costs.

If you don't pay the deficiency: The lender can sue you, win a judgment, and garnish your wages or bank account.

Taking action now,even if that means surrendering the car voluntarily,gives you more control and better options.

How To Decide What's Right for You

Your best option depends on your specific situation. Ask yourself these questions:

Do you need this car? If you need it for work or essential transportation, prioritize keeping it. If you have alternatives, letting it go may relieve financial pressure.

How much is the car worth versus what you owe? If you're significantly underwater (owe much more than the car's value), keeping it may not make financial sense.

Can you afford the payment if other debts disappear? If bankruptcy would free up enough money to cover your car payment comfortably, that path makes sense.

Is this a temporary hardship or ongoing struggle? Hardship programs work for short-term problems. Long-term struggles need permanent solutions like bankruptcy or selling.

What's your credit situation? If your credit is already damaged, voluntary surrender or bankruptcy may make more sense than struggling to avoid more damage.

Walk through these questions honestly. Your car payment is one piece of your larger financial picture.

Take the Next Step

You can't afford your car payment, but you can take control of what happens next.

Start by calling your lender today. Ask about hardship programs or refinancing options. Most lenders prefer working with you over repossessing your car.

If you're drowning in other debts beyond your car payment, bankruptcy might offer the fresh start you need. Our free Chapter 7 filing tool helps you prepare your forms in about an hour, with guidance at every step.

See if you qualify for Chapter 7 bankruptcy in two minutes.

This article is for educational purposes only and does not constitute financial or legal advice. Consult a licensed attorney or financial advisor for guidance on your specific situation.