Bankruptcy and Your Car: Can Filing for Bankruptcy Keep Your Car from Being Repossessed?

The short answer is that an “automatic stay” is imposed when you file for bankruptcy. It protects everything you own and prevents creditors from pursuing you for payment. This also applies to your automobile. However, your protection will only be temporary if you do not pay the vehicle loan. Bankruptcy allows different options to help you keep the car and maintain the loan.

The Automatic Stay Takes Effect Immediately.

The automatic stay operates automatically and without a judicial order. Your creditors are powerless to prevent it from taking effect. When you file for bankruptcy, your case will be assigned a number. All you have to do is provide that case number to stop collection efforts. If you are concerned about losing your vehicle, filing quickly can give you the protection you need to halt repossession.

You Must Get Current on Your Car Loan

The automatic stay is only a temporary solution if you are unable to get caught up on your loan arrears. Vehicle loans are secured by car; if you do not pay the loan, the lender has the right to take the vehicle back to try and recoup their loss. Therefore, even if you file bankruptcy, the automatic stay will only be in effect until either your bankruptcy is concluded or the auto loan lender asks for early relief. This relief will allow them to pick up repossession efforts, but you will not be liable for any deficiency balance owed after the car is sold.

What Are Your Repayment Options?

You may be wondering what you can do if you are behind on your car loan. The most common course of action is to file a Chapter 13 bankruptcy. In a Chapter 13, you can pay the car loan through the bankruptcy filing and get caught up on the amount you are behind. This can have a number of benefits, depending on the circumstances. Often, you can stretch the loan out to a five year repayment and adjust the interest rate – both of which can lower your monthly obligation. If you qualify, you can even lower the amount of the car loan itself by filing a motion with the bankruptcy court. A qualified bankruptcy attorney can assess the facts of your case to see if this may be an option for you.

What If My Car Was Already Repossessed?

The key in this instance will be to act quickly. If you file a Chapter 13 bankruptcy before they auction the vehicle, you are typically able to get your car back. Keep in mind that once the car is auctioned, there may be little you can do, so it will be in your best interest to move as quickly as possible.

If you are behind on your car payments do not wait to contact a bankruptcy lawyer to discuss your options. Call 800.400.9000 right away to speak with Winterbotham Parham Teeple, a PC!