Can Filing Chapter 7 Bankruptcy Stop My Car From Being Repossessed?
You’re at the end of your financial rope. The bills have piled up and there seems to be no end in sight. You’ve decided that the most prudent decision you can make for your future and your sanity is to file for Chapter 7 bankruptcy. You will probably feel at ease once you’ve talked things through with your assigned credit counselor, but you may be wondering: Will they take everything I own? I need my car to get to work – what is going to happen to it?
Things may seem desperate right now, but you can get through this. Repossession and bankruptcy are both situations we hope to never deal with, but they can happen to anyone. Regardless of how you got here, the focus should now be on the future and how to turn things around. If you are considering filing for bankruptcy and worried about the possibility that your car might be repossessed, here is what you need to know.
What Is Chapter 7 Bankruptcy?
Filing for Chapter 7 bankruptcy is not an easy fix. Filing Chapter 7 means that the bankruptcy court will liquidate your non-exempt assets, sell them, and use them to pay back your creditors. If you don’t have any of these non-exempt assets, your case will be deemed a “no asset” case. Your primary home is sometimes an exempt asset, but all of your other stuff is fair game.
One of the Best Parts of Filing Chapter 7 Bankruptcy
The collection phone calls will finally stop. Now you can breathe a little bit more freely without the constant nagging and worry coming from your creditors. Once you file, an automatic stay is put in place. Once you have it, it becomes illegal for most creditors to contact you about debts. This includes the financial institution backing your auto loan.
But Can They Still Repossess My Car?
Maybe. The bad news is that yes, the lender can still repossess your car – but only if given court approval. Putting it like that makes it sound difficult for the lender, but the judge is likely to lift the automatic stay as long as they show your loan agreement along with proof that you are behind on your payments.
Filing Bankruptcy Really Just Prolongs the Repossession Process
You can fight your car lender's motion for relief of automatic stay within approximately two weeks of when they file. After you file the motion, you will get a court date scheduled within about a 30 day time period. It is going to be pretty tough to get out of this one unless you can show proof that the lender never notified you or that you paid and they simply lost your payments.
Redeeming Your Car is Made Easier By Filing Chapter 7 Bankruptcy
Redeem your car while filing Chapter 7 can make it so you only have to pay the actual cash value of your vehicle. This can be a great help to people who are very underwater on their car loan. The savings could be in the thousands.
If you have a friend or relative who is able to lend you the money, or a financial institution willing to lend you money, then you might be able to save your car.
The Bottom Line
Bankruptcy can be freeing, but it is also complicated. Before making any decisions about bankruptcy, consult with a competent bankruptcy lawyer to be on the safe side.