Any time you finance a purchase, there is a risk of repossession because the bank or institution is the owner until you make your final payment. Although repossession is most commonly associated with automobiles, any item that is financed can be repossessed, including furniture, appliances, or tools. Missing payments carries serious consequences, which is why many people pursue bankruptcy as an option to protect themselves.
Will Bankruptcy Stop a Repossession?
When you file under any chapter of the bankruptcy code, the automatic stay immediately goes into effect to protect you. The automatic stay prohibits creditors from continuing collection efforts against you, including any contact and repossession. A bankruptcy gives you protection rights as opposed to simply not paying on your loan.
If you are concerned about having your items repossessed, contact my office immediately to review your financial situation and discuss the various legal tools available to you. Speaking with an experienced bankruptcy attorney is imperative because your lender can ask the court for special permission to repossess your car regardless of the automatic stay. If this happens, I am highly trained to negotiate a solution with your lender. Contact me today for a free consultation.
How to Avoid Vehicle Repossession During Chapter 7 Bankruptcy
If a car loan goes into default, you may be able to work with the lender to prevent repossession from taking place. Here’s how:
- Cure your default – If you can afford to catch up on your payments, most lenders will not repossess your car.
- Negotiate with your lender – Discuss reducing your payments, interest rate, or even principal balance with your lender. Bankruptcy laws will discharge your obligation to pay any remaining loan balance if your car is repossessed and most lenders want to avoid this from happening.
- Redeem the car – You can try to redeem (buy back) your car in Chapter 7 bankruptcy for its fair market value. You must file a motion with the court and make a lump sum payment in order to redeem. This is a good option if your car is worth significantly less than your loan balance.
Returning a Repossessed Vehicle
If your car is repossessed just before you file bankruptcy, there is a chance you can get it back if you act quickly. Lenders want to resell your vehicle quickly to cover your outstanding loan.
In a Chapter 7 bankruptcy, you can ask the court to order the lender to return your vehicle if you can make up your past due payments and possibly reimburse the lender for any costs it incurred in repossessing the vehicle. You’ll need to file a motion in your bankruptcy proceeding asking for the judge’s approval.
In a Chapter 13 bankruptcy, more often than not, your vehicle will be returned to you provided that a Chapter 13 plan is filed that will pay the debt owed, or, in some cases, just the fair market value of the vehicle. This allows you to include your past due car payments in your repayment plan and keep your car.
At the very least, filing for bankruptcy will let you hold onto the car legally until your bankruptcy hearing, where the trustee will decide if you need to give it back or are allowed to keep it because of necessity to work. Contact me today so I can help you create a more manageable financial situation while protecting your belongings.