Filing bankruptcy after car repossession can be a daunting experience for anyone who finds themselves in such a situation. Car repossession happens when you default on your car loan payments, leading to the lender taking back possession of the vehicle. This is a serious issue that can lead to financial distress and leave individuals wondering what their options are.
If you are facing car repossession, it is important to know that bankruptcy may be a viable option for you. Bankruptcy can help you discharge certain debts and stop collection efforts, including car repossession. However, it is crucial to understand the bankruptcy process and the implications it may have on your financial situation.
Find out more about car repossessions, and how auto loan charges off work.
Chapter 7 Bankruptcy: How to Get Your Repossessed Car Back
Here are some things you can expect from Chapter 7 bankruptcy.
If the Lender Hasn’t Taken Your Car Yet
The automatic stay stops a lender from trying to repossess your vehicle if you are behind on your payments or file for bankruptcy. The lender can request that the stay be lifted. This asks the bankruptcy court for permission to repossess the car. Unless you intend to invoke one of these remedies, most courts will allow the lender to proceed with repossession.
Likely, you have already indicated to the court that you intend to invoke one option when you complete the Statement Of Intention in Chapter 7 form. The form is either filed with your initial paperwork, or it is included in the package.
You Can Redeem the Property
Chapter 7 bankruptcy lets you buy the car back in one lump sum from the lender. You can also redeem the car for a sum equal to its “replacement value”. Instead of paying the outstanding loan balance, which is often more than the car’s value, you can have the car returned by paying what a retailer would charge for it based on its age and condition.
Reaffirm Your Car Loan
You can also reaffirm your debt with the lender. You and the lender will agree to new terms when you do this. Also, you may be able, for example, to roll over your unpaid payments into a new loan amount. Reaffirming a car or any other debt is something you should think about carefully. Your bankruptcy will not discharge your debt if you reaffirm it. If you default on your car loan and the vehicle is repossessed, you will be responsible for the deficit balance – the amount left after the lender has sold the car and applied the proceeds to your loan. If you surrender the car to the bankruptcy trustee, your deficiency liability is discharged.
It is important to note that in the event that you possess considerable nonexempt equity in your vehicle, which is not the case for most people with car loans, the bankruptcy trustee has the right to sell your car and allocate the profits among your creditors.
If Your Car was Repossessed Before Filing For Bankruptcy
You might be eligible to file for bankruptcy if your car was taken away before you file for bankruptcy. But you must act quickly. You won’t be able to get the car back once it is sold. It varies from one state to another, but it is usually around ten days.
Legally, any equity that is not exempt from bankruptcy must be returned by the lender. Repossession is illegal. An illegal preference is when a creditor received payment within the first 90 days after your bankruptcy. Only the trustee, and not creditors, can decide who gets paid. However, in practice, car loan lenders will not return the vehicle without an order from the court. This usually means that you will need to consult a bankruptcy lawyer.
After you get the car back, it is your responsibility to redeem the car and/or reaffirm your contract to keep the vehicle.
How Chapter 13 Bankruptcy Can Help You Get Your Repossessed Car Back
You might be eligible to keep your car if you file for Chapter 13 bankruptcy if you are already thinking about it. You can repay any arrears on your car loan through Chapter 13 bankruptcy. If you can make regular plans and car loan payments, your car can be kept. Chapter 13 is also subject to the automatic stay. This means that you will be able to stop any pending repossession sale.
Filing for Chapter 13 bankruptcy can be difficult. To save your car, you will need to make three to five years of payments.
There Are Other Ways to Get Your Car Back After Repossession
Consider your options before you rush to the bankruptcy court. You have the option to either reinstate the contract by making all the back payments and covering storage costs or to redeem the property by paying the entire amount along with the costs. You can return your car if you act quickly after it is repossessed.
Don’t Let Car Repossession Ruin Your Life: Contact Tenina Law Today
At Tenina Law, we understand the stress and financial strain that comes with car repossession. We know that it can be overwhelming and confusing to navigate the legal and financial implications of repossession, which is why we are here to help. Our team of experienced bankruptcy attorneys is committed to helping our clients regain financial stability by guiding them through the bankruptcy process.
Filing for bankruptcy after car repossession can be a complex process, but our attorneys have the expertise and knowledge necessary to ensure a successful outcome for our clients. We will work with you to determine the best course of action for your unique situation and provide support every step of the way. Our ultimate goal is to help you achieve a fresh financial start and move forward with confidence.
Contact Tenina Law today to schedule a consultation and take the first step towards a brighter financial future.