Car Repossession

How Filing for Chapter 7 Bankruptcy Can Prevent Car Repossession

If you are failing to keep up with the payments on your car loan, you risk the danger of the creditor repossessing your car. While filing for Chapter 7 bankruptcy may not automatically prevent car repossession, the stay period that comes with it can give you the needed leverage to negotiate a new agreement with your creditor, or even cure your default. Continue reading to know more about how filing for Chapter 7 bankruptcy can help prevent car repossession.

The Automatic Stay Period

When you file for Chapter 7 bankruptcy, an automatic stay goes immediately into effect. This implies that for the duration of the bankruptcy process, most creditors cannot continue their debt collection activities, including trying to repossess your car. While it only lasts for a few months, the time opens up some options for you to exploit in order to prevent car repossession.

Your Options

Negotiate a New Loan

A debt discharge under Chapter 7 could be potentially costly for the creditor, especially if the car is worth less than your loan balance. Faced with such a scenario, they may be more willing to open up new negotiations with you, and agree to be a more manageable repayment schedule.

Cure Your Default

Since collection activities are halted during the bankruptcy process, it can allow you to bring your loan balance to current. If the lender sees you can continue paying your debt, they would see no reason to repossess your car.

Redeem Your Car

Under bankruptcy, you have the option to redeem your car from the lender. This means that you essentially buy back the vehicle by paying the lender its market price or the remaining debt you owe to them, whichever is lower. To redeem, you are required to file a motion with the bankruptcy court, and obtain their permission.

It’s a useful option if your car is worth less than your outstanding debt, or you don’t owe much on the vehicle. However, the payment made has to be in a lump sum. So unless you have ready cash in hand, this option may not be viable.

Exceptions

In some cases, an automatic stay period may not be entertained. This is usually the case if you are a serial filer who has filed for multiple bankruptcies in a short span of time. Additionally, your creditor can petition the court to have the automatic stay lifted and resume their collection activities.

In both scenarios, the judge makes their decision on a case by case basis. It is best to consult with a legal attorney beforehand if you are considering filing for bankruptcy primarily to benefit from the automatic stay period.

Hire an Attorney

Because bankruptcy can be difficult and time-consuming, the aid of a legal attorney can be crucial to help you better navigate through the process. For a free consultation with an experienced lawyer, book an appointment with us online or call 512-640-3340.