Filing Bankruptcy to Stop Repossessions

Losing your car is more than just an inconvenience. You depend on your vehicle to get to work and transport your family. Being without a vehicle can be stressful and costly. Therefore, when you are unable to make your car payments, you may panic.

If your vehicle has been repossessed or is about to be repossessed, contact a bankruptcy attorney for help. A bankruptcy lawyer might be able to help you prevent repossession or help you get your car back if you act quickly. Schedule your free consultation with an experienced bankruptcy lawyer to discuss how you can keep your vehicle.

Can The Lender Take My Vehicle Without a Court Order?

Yes, your lender can repossess your vehicle without a court order provided it is a “peaceful” repossession. Repossession companies are not permitted to breach the peace when taking a vehicle. Therefore, if you tell the repo agents that they cannot take your vehicle, they should stop unless they have a court order authorizing them to take the vehicle.

However, many repo agents repossess vehicles in the middle of the night or while you are at work so that you cannot object to the repossession. Therefore, if you are behind on the loan payments for your vehicle, you could walk outside, and your car could be gone.

Can I Get My Car Back If It Has Been Repossessed?

If you can afford to pay the loan in full, plus all costs and fees, the lender will return your vehicle. Your other option is to file a Chapter 13 bankruptcy, but you must act quickly. You have less than 10 days from the date of the repossession to file your bankruptcy case and a motion for the return of the vehicle. It is much better if you file your Chapter 13 bankruptcy case before the repossession occurs.

How Does a Chapter 13 Prevent a Repossession?

When you file your bankruptcy petition, creditors are barred from taking any actions to collect a debt, including repossessing a vehicle. If the creditor objects to the payment terms proposed in your Chapter 13 plan, it must file an objection to the plan with the court instead of simply taking your vehicle.

However, most lenders understand the laws governing the treatment of automobile loans in bankruptcy plans. Therefore, unless your plan proposes terms that do not comply with the law, a lender simply accepts the fact that you are keeping your vehicle and it will receive payments from the Chapter 13 trustee according to the terms in your plan.

Modifying the Terms of Your Car Loan in Bankruptcy

When you file your Chapter 13 plan, you can lower your monthly payments by spreading the payments out over 60 months. In addition, the interest rate set by law is often lower than the interest rate you are paying for your car loan, thereby helping to reduce the amount you must pay to the creditor.

In addition, if your vehicle is worth less than the payoff of the loan, you might be able to lower the amount owed on the lien. A motion to value proposes that the creditor will receive an amount equal to the fair market value of the vehicle. The remaining debt owed to the creditor is added to your unsecured debts.

In other words, any amount owed above the market value of the vehicle is paid as an unsecured debt and discharged when you complete your Chapter 13 plan. Many debtors pay a small percentage to unsecured creditors; therefore, valuing your vehicle may significantly reduce the amount you must pay to release the lien on your vehicle.

Repossessions and Chapter 7 Cases

File a Chapter 7 case will not get your vehicle back if it has been repossessed. Since there is not a repayment plan in a Chapter 7 bankruptcy case, you must bring the loan current or pay the loan in full depending on the creditor. However, filing a Chapter 7 bankruptcy case may still help you if your vehicle is repossessed.

If the lender does not receive enough money to pay the loan in full when it sells your vehicle, the lender can file a lawsuit seeking a deficiency judgment. The judgment is a personal debt against you. If your state allows judgment holders to garnish wages, you could have your wages garnished for the amount of the judgment. Even if your state does not allow wage garnishments for judgments, the lender may take other actions to try to collect the judgment debt.

However, filing a Chapter 7 bankruptcy case can get rid of the judgment debt or prevent the judgment from being granted. If you file your Chapter 7 bankruptcy case before the lender receives an order from the court granting a judgment, the bankruptcy prevents the lender from continuing with any action to obtain a judgment. If the lender has already obtained a judgment for the repossession deficiency, your Chapter 7 bankruptcy case discharges the judgment debt. In either case, you are not legally responsible for the debt and the lender cannot take any further action to collect the debt.

A Chapter 7 case may not help you keep your automobile, but it can prevent you from owing money on a vehicle you no longer own.

Repossessions and Chapter 7 Cases

It is understandable to have questions about filing bankruptcy. However, if you are behind on your vehicle loan payments, the matter is urgent. Take advantage of the free consultations offered by bankruptcy attorneys to discuss how filing for bankruptcy relief can stop a repossession and help you keep your vehicle.

In many cases, filing a Chapter 13 bankruptcy case is more affordable than you may assume. You may find that you are paying less each month through your Chapter 13 plan than you were paying directly to your creditors. Also, you know that when your case is complete, your unsecured debts are discharged, and you can move forward without the burden of debt preventing you from reaching your financial goals.