The alarm goes off at 7:00am….Shower, breakfast, coffee, all ready for work…..Walk out to the drive-way and your car is gone. Once you realize it was not stolen, the next call is to a bankruptcy attorney because a creditor took your car.
Bankruptcy can help. Not only can bankruptcy prevent the repossession of your vehicle, but filing bankruptcy can also help get the car back —as long as it has not already been sold at auction. Immediately upon filing a bankruptcy, an “automatic stay” is in place. An automatic stay is like a security blanket over you and your assets which protects you from your creditors and requires the release of your vehicle.
There are several ways bankruptcy can assist you with a vehicle repossession and missed car payments:
1. Chapter 7: A Chapter 7 allows you to walk away from your debt and gives you a fresh start. A Chapter 7 can protect your vehicle when you are current on your payments. If a creditor repossesses your vehicle, filing a Chapter 7 will normally not assist you in retrieving your vehicle unless you can bring the loan current. Chapter 7 is a debt elimination tool; and as such, does not have repayment plan component—like the one in Chapter 13—which is necessary to cure and/or modify your auto loan (i.e. lower interest and payments) without having to bring it current all at once.
2. Chapter 13: Partial repayment of your debt. A Chapter 13 has a couple advantages regarding your vehicle payment.
a. If you are behind on your car payments, a Chapter 13 repayment plan forces the auto lender to let you spread out your car contract payments over a 3-5 year repayment plan.
b. For those car loans that are more than 910-days old (about 2.5 years), a Chapter 13 repayment plan actually allows you to pay what your car is worth rather than what you owe on it.
c. As many of us have seen, car contracts tend to come with very high interest rates; a Chapter 13 repayment plan can actually impose a significantly reduced interest rate.
One issue to remember when getting your repossessed car back, you must be able to show that you have full-coverage insurance that complies with your car loan contract and also shows the car creditor as the lien holder and loss payee. Without insurance, the car creditor could attempt to continue to hold onto your repossessed car.
It is best to consult with an attorney before your car is repossessed so that the attorney can advise you of your options to prevent the repossession. However, if your car has been repossessed recently, the important deadline to remember when faced with a car repossession is to make sure a bankruptcy is filed before the car is sold at auction. Unfortunately, once the car is sold, a bankruptcy will not allow you to get the vehicle back.
Call our San Antonio law office and schedule a free consultation with an attorney to find out how we can help.