Having a car repossessed due to missed loan payments can make a troubling situation feel impossible to overcome. If a lender repossesses a vehicle, is there any point in still filing bankruptcy? Oftentimes, yes, and quickly if one hopes to get the car back.
Many repossessed vehicles are sold at auction for less than the balance of the loan. A creditor will likely file a lawsuit to collect the deficiency, so the borrower will still be on the hook for what is owed. If the debtor does not respond, the headaches of a creditor pursuing payment begin again. This may include wage garnishment.
Getting the car back
By filing Chapter 13 bankruptcy, a debtor can prevent a creditor from selling the seized vehicle and begin developing a repayment plan that will allow them to get the car back. A debtor may be able to lower the amount of a monthly car payment to make it more manageable. Filing for bankruptcy must be done within 10 days or the creditor has the right to sell the repossessed vehicle.
Filing Chapter 7 bankruptcy also immediately puts an automatic stay in place, so a repossessed car cannot be sold at auction without court permission. A debtor may be able to negotiate an agreement with the lender to get the car back without paying the full amount due on the loan or getting better terms on the loan. A lender may be more willing to renegotiate the terms of the loan knowing the debtor can eliminate their liability through bankruptcy.
Bankruptcy without getting the vehicle back
Chapter 7 bankruptcy can help even if a debtor is unable to negotiate repayment of a loan or get the car back. Chapter 7 bankruptcy discharges unsecured debt, so the debtor will not be liable for any loan balance that exists after a repossessed car is sold at auction.
Repossession of a car or foreclosure on a house can make it seem like life is falling apart. Bankruptcy is designed to help put life back together. The first step is to connect with a knowledgeable bankruptcy lawyer who can assess the situation and recommend the steps to take next.