As many Michigan residents know, one of the contributing factors to the Great Recession was the "subprime" home mortgage market, through which many people received house loans that they could not afford. The end result of these liberal lending practices was a disaster both for investors who no could no longer count on receiving their expected loan payments and, especially, for average homeowners who lost their dreams to foreclosure.
While regulators have taken steps to ensure that the "subprime" housing market never creates another unmanageable economic situation again, Michigan families need to be aware of the fact that the "subprime" market in auto loans is still alive and well, leaving many people who need a car for their daily needs drowning in debt and high interest payments.
These practices can lead to serious financial hardships for consumers. With limited income and high interest rates on a car loan, consumer may fall into serious financial trouble and try to file bankruptcy in order to stop repossession of their vehicles, at least for the time being. Others who do not take a bankruptcy route may wind up having their cars repossessed. If this were not embarrassing enough, the repossessed car usually doesn't bring in nearly enough money in a sale to cover the outstanding balance. This means that a person may find himself or herself paying a bill but not having a car to show for it.
Hopefully, officials will respond promptly to these concerning behaviors so as to correct before too much damage can be done. In the meantime, a bankruptcy may be a good solution for someone who needs help out of a difficult financial situation.
Source: The New York Times, "When a car loan means bankruptcy," Aug. 8, 2014.