Bankruptcy is an option for those who cannot meet their financial obligations. One area that bankruptcy may give you relief in is car repossession. If you are considering filing for bankruptcy in order to avoid your car from being repossessed, there are some things you need to be aware of first.
Bankruptcy and Repossession
Bankruptcy proceedings are known as chapters and the two most common ones that people use are Chapter 7 and Chapter 13. In Chapter 7 bankruptcy, most of your assets are used to pay off your outstanding debt. In Chapter 13 bankruptcy, your outstanding debts are restructured so that you can pay them off over a length of time. Both Chapter 7 and Chapter 13 bankruptcies will hurt your credit history.
Automatic Stay: Order of Relief
When you file for either Chapter 7 or Chapter 13 bankruptcy with the courts, they will issue what is called an Order for Relief. The Order for Relief, also known as an automatic stay, stops your creditors from taking further action against you in order to collect the money you owe them. As long as this automatic stay is in place, your vehicle cannot be repossessed. The exception to this is that if they filed the order for the repossession before you filed for bankruptcy, they then have the right to repossess the vehicle.
Chapter 7 Bankruptcy
With Chapter 7 bankruptcy, you may be able to keep your vehicle, but there are options that go along with this. One of your options is to continue to make the required monthly payments on your car loan. Essentially, you are reaffirming your loan, turning it into a new loan agreement. Another option you have is to pay the lender the current value of the car, essentially purchasing the car. If you cannot do either of these options, then your car may be repossessed by the lender.
Chapter 13 Bankruptcy
With Chapter 13 bankruptcy, you will have the chance to take care of your back payments as well as pay off the vehicles through a repayment plan. The repayment plans for Chapter 13 are typically three to five years. This option is only available if you are able to continue making the monthly payments on the loan.
So, you see, you do have options available to you when it comes to saving your car from being repossessed and bankruptcy is one of those options. However, when it comes to bankruptcy and repossession every situation in unique, so it is important to consult with an experienced attorney (such as Donald T Tesch, PS).