Can a Bankruptcy Attorney Stop My Car From Getting Repossessed?

TRI Writer • July 20, 2022

Are you behind on your car payments? Are you afraid your lender will repossess your vehicle? If so, you may be seriously considering reaching out to a bankruptcy attorney to stop your car from being repossessed.

Chapter 7 Can Temporarily Delay a Lender from Repossessing Your Car

If you are behind on your car payments, filing Chapter 7 bankruptcy cannot prevent a vehicle repossession permanently. However, Chapter 7 can create a temporary delay to create a chance to take action for a more permanent solution.

Chapter 7 & the Automatic Stay:

The automatic stay is issued immediately upon filing Chapter 7 bankruptcy. The automatic stay is essential for those facing a car repossession because the automatic stay prevents creditors from continuing their collection activities. Lenders are prohibited from taking any action seeking payment of the debts associated with the bankruptcy, including repossession. To continue with the repossession process, the auto lender must get the court’s approval first. However, the Chapter bankruptcy process is generally quick (most Chapter 7 bankruptcies take only months). Once the bankruptcy case is closed, the automatic stay is no longer in effect, and the lender would be free to take action.

Why Would the Court Give the Lender Permission to Repossess During Chapter 7 Bankruptcy?

In some cases, Chapter 7 bankruptcy’s automatic stay won’t be able to prevent a car repossession throughout the entirety of the bankruptcy case. The lender may decide to seek court permission to repossess the vehicle during the bankruptcy with a motion to lift the automatic stay. In most cases, the judge will grant this request unless the filer can show they are making payments and attempting to catch up on past due payments.

What to Do to Avoid Car Repossession After Your Chapter 7 Bankruptcy Case is Closed:

Filing Chapter 7 bankruptcy can give you the time to negotiate new loan terms with the lender. Doing so could allow you to avoid repossession and keep your car. When a borrower is in the midst of bankruptcy, the lender knows that a bankruptcy discharge wipes out the personal liability for the loan. While it does not negate the lien held by the lender, it does limit their options. After a bankruptcy discharge is received, repossession is the only option left to a lender. Knowing this usually gives lenders an incentive to renegotiate new loan terms (especially if you owe more on the vehicle than it is worth). Consider negotiating for a reduced balance or lower interest rate. You may need to reaffirm the loan if you are successful in the negotiations.

Chapter 7’s automatic stay allows you to bring your loan current or “cure the default.” If you can bring the loan current, the lender no longer has cause to repossess; they would prefer you keep it and continue making payments as they make more money that way.

Filing Chapter 7 bankruptcy allows you to wipe out the lien by redeeming the vehicle. Buying back the car at its fair market value from the lender can wipe out the lender’s lien. Redeeming a car can mean saving significant money if the vehicle is worth less than the loan balance. However, redemption is only possible if the bankruptcy filer can make a lump sum payment to the lender, and a motion must be filed to obtain the bankruptcy court’s permission.

If you are afraid your lender will soon repossess your car, or you need to talk about obtaining a discharge of debt through bankruptcy , get in touch with Kenneth C. Rannick, P.C., Tennessee, and Georgia bankruptcy attorney. You are in good hands with Kenneth C. Rannick P.C.

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