What To Do If You’ve Been Threatened with Car Repossession

Are you behind on car payments and are now being threatened with car repossession?

Trust us when we say that you are FAR from alone. Times are tough and keeping up with all the bills is challenging for many folks. There are available avenues that will allow you to keep your car though.

The first step is to contact a highly reputable bankruptcy attorney to explore if bankruptcy may be an option for relief from creditors threatening to repossess your car.

Why Do You Need a Bankruptcy Attorney?

It might seem strange that you’d hire a bankruptcy lawyer to help you navigate car repossession. But, if you’re behind on your car payments and looking at repossession, filing for bankruptcy can really help.  

Filing for bankruptcy will generate what’s known as an automatic stay. This stops creditors, at least temporarily, from repossessing your car. Understanding the different types of bankruptcy laws can be confusing though. And depending on which one you file under, the options for keeping your car can vary.

This is why it’s crucial to work with an experienced bankruptcy attorney who can help guide you through the process so you aren’t left struggling even more to make ends meet without a car.

The Different Kinds of Bankruptcies

There are six types of bankruptcies. They are Chapters 7, 9, 11, 12, 13, and 15. The two chapters most often used in dealing with car repossession are Chapters 7 and 13. Which one your attorney recommends will depend on your specific situation. An experienced bankruptcy attorney will help you decide which is right for you.  

Chapter 7 Bankruptcy

A Chapter 7 bankruptcy involves the liquidation of your assets. It’s the quicker of the two chapters because there’s no repayment plan involved. You are typically able to keep personal property that’s exempt from liquidation if it enables you to continue working. This includes your vehicle.

In addition, a Chapter 7 bankrutpcy allows you to reaffirm your debt. This means you can make an agreement with the creditor to pay some or all of what you owe to keep you in your car. Chapter 7 also allows you to redeem for vehicle. This means you pay a smaller lump sum to the creditor to fully satisfy the debt. You may ’ll still have to liquidate non-exempt assets, however.

However, not everyone qualifies for Chapter 7. If your average monthly income for six months (prior to filing for bankruptcy) is not less than the median income for your household size in your state, you’ll have to pass a means test. If the results of the means test show that you have too much disposable income, you’ll likely need to switch to a Chapter 13 bankruptcy filing.

Chapter 13 Bankruptcy

With a Chapter 13 bankruptcy, most creditors must stop any collection efforts against you because of the automatic stay. This is good news if you’ve been threatened with car repossession.

This kind of bankruptcy gives you several options. If the car payments are beyond your means, or you’re making payments on an unreliable car that needs a lot of repairs, you may be better off surrendering it and giving it back to the lender.

If the car is still serving you, another option is to catch up on the payments through a payment plan that will be established when you file for bankruptcy. You must stay current with those plan payments. In addition, you may choose to pay the entire balance of what’s owed so you’d own it free and clear after the plan ends. 

Another possibility is reducing your car loan through a Chapter 13 bankruptcy. This is often the case with an older car or if the amount of your car loan is more than the value of your car. Here, you pay the creditor less than the full amount. When the plan ends, you will own the car free and clear.

An attorney well-versed in car repossession as it pertains to the bankruptcy process should be able to provide you with the proper guidance.

Threatened with Car Repossession?

If you’ve been threatened with car repossession, don’t hesitate to contact us today to explore how a Chapter 7 or 13 bankruptcy can help you.

It’s important to note that there is absolutely no shame in pursing bankruptcy. In fact, most of our clients claim it was one of THE best decisions they’ve ever made in terms of keeping their cars.

And if we determine bankruptcy isn’t the best route for you, we’ll point you in the direction of any one of a number of bankruptcy alternatives that are right for you.