A reader wants to know how he can keep his car. Sadly, he can't. But he has an option.

Question: My problem is like those with payday loans. I took out a “loan” from TitleMax — they claimed it isn’t like a pay day loan. While I know I have bad credit and couldn’t get a loan any other way, I was willing to pay the higher interest to get the money we needed at the time.

Since they have my title to the car, if I go bankrupt, would that mean they get my car? Even if I made enough payment to already pay off the original “loan” amount? (I hate these companies and wish they were illegal)

— Allan in Texas

Steve Rhode answers…

Unfortunately, they would get the car. The reason is simple: At this time, it’s not your car. When you signed the title over to the lender, it’s now their security — to do with as they please if you don’t meet the terms of the loan.

You can go bankrupt and discharge your liability to repay the loan, but to get your title back, you need to repay the loan as per your agreement.

I know it sure feels like you’ve paid enough, but you haven’t. Title loans carry a high interest rate, and to fully repay the loan with partial payments is going to inflate the amount you repay to far more than you borrowed.

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This is why these loans are both a trap to consumers and profitable to lenders.

Ultimately, the amount you have to pay is in the loan agreement you agreed to. If you want to try and alter that agreement, you’d need either a legal basis for being able to do so, or their cooperation. I would not count on the latter. They’ve got your car and that was the goal.

I get why people fall into these title loan situations. It’s typically someone who has bad credit, a regular lender wouldn’t touch them, they need cash straight away because they don’t have an emergency fund or savings to fall back on, and they’re willing to sign away their vehicle for some cash-on-hand now. My usual advice for anyone who asks me if they should get a title loan is Nooooooooo!

At this point, you get the value of a great learning experience on what not to do again. File bankruptcy, get your legal fresh start, and build a better financial foundation moving forward.

While the moment might feel like a failure, it’s really a bright new beginning for a shot at doing better. The secret: Start rebuilding your credit right after bankruptcy, and you’ll be in good shape in about a year to buy a new car with great financing. Read more about that.

Steve Rhode is better known as the Get Out of Debt Guy.

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Article last modified on August 3, 2017. Published by Debt.com, LLC .