How Bankruptcy Can Help You With A Car Repossession

When you file for bankruptcy, the courts will order that all repossession actions taken against you end immediately. However, you may be in the process of having your car repossessed and you may wonder if this will also be affected by your bankruptcy. Here are some ways bankruptcy can help you with a car repossession.

When a Repossession Occurs

After you have defaulted on your loan for a period of time, the lender will attempt to repossess your car. Sometimes, the lender may take back your car the moment that you miss a payment. However, in most cases, your car will be repossessed after you have been given a sufficient warning. Even if several months of passed, your car may not be repossessed right away and you may be able to make a payment to halt the repossession. You are also allowed to voluntarily surrender your car.

Regardless of how the lender takes back possession of your car, you will still owe the lender what's left on the balance of the loan. The lender may file a lawsuit to collect the deficiency. Not responding to the lawsuit will lead to the judge filing a deficiency judgement. Therefore, if you owe more money than what your car is worth, you will owe this to the lender. However, if you file for Chapter 7 bankruptcy, you may be able to discharge this debt.

The Automatic Stay

Once you have filed for bankruptcy, you will receive an automatic stay. This will stop all debt collection efforts and will also stop the repossession of your car. However, there are other things it will not stop, such as criminal prosecution, visitation proceedings, and child support payments. However, it can buy you more time.

Chapter 13 as an Alternative

You may also file Chapter 13 to stop a car repossession. However, you will only have 10 days to do so. Otherwise, the lender will be able to sell your car. When you file for Chapter 13, the debt that you owe to the lender will become a part of your Chapter 13 repayment plan. You will usually need to repay the entire loan. However, if you are earning a wage and were simply temporarily behind on your bills, you may be able to stop the repossession and get back on your feet. Regardless of the option you choose, you will want to speak with a filing bankruptcy attorney immediately when trying to determine if filing for Chapter 13 bankruptcy is the right option for you.