If you are unable to make payments on your vehicle and you have decided that bankruptcy is the right option for you, the next step is to decide whether you should file for Chapter 7 or Chapter 13 bankruptcy. While Chapter 7 bankruptcy will not permanently stop your car from being repossessed, it may buy you time to get your defaulted loan back in check. Read on to learn more about how Chapter 7 bankruptcy may be able to help!
Chapter 7 Bankruptcy and Repossession
It’s important to note that in Chapter 7 bankruptcy, there are still ways for lenders to repossess your vehicle. Here are two ways that this can happen.
The Automatic Stay
When you file for bankruptcy, the automatic stay goes into effect. This prohibits creditors from collecting or repossessing your vehicle without court approval. While this can give you time to get your finances in order, the Chapter 7 bankruptcy automatic stay only lasts a few months. This means that once your case is closed the lender may repossess your vehicle.
If a lender wants to repossess your car sooner, they may be able to do so by asking for court approval regardless of the automatic stay. Most Chapter 7 judges will approve this motion by the lender unless you can prove that you are attempting to catch up on missed payments.
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How You Can Stop Repossession
While there are ways a lender can repossess your vehicle despite the fact that you filed for Chapter 7 bankruptcy, there are also things you can do to help stop repossession.
The temporary automatic stay that goes into effect during Chapter 7 bankruptcy allows you enough time to negotiate with your lender. In some cases, you may be able to negotiate terms with them to keep the car and ultimately avoid repossession.
Bring Your Loan Up to Date
If you can find a way to bring the defaulted amount on your loan up to date during the temporary stay, do it! After this, the lender will not have any more reason to repossess your vehicle. Just be sure to continue making payments!
Wipe Out the Lien
Under Chapter 7, you may also redeem the car if you buy it back at it’s fair market value. This will wipe out the lender’s lien. This can help you save a lot of money if the market value of your car is significantly less than the loan.
Related Post: The Effects of Bankruptcy on Repossession
Chapter 7 Bankruptcy at Groce & DeArmon
If you think that Chapter 7 bankruptcy can benefit you in the event of a repossession, call Groce & DeArmon today! Our bankruptcy attorney Shari DeArmon has over 30 years of experience with Chapter 7 bankruptcy cases in the Springfield area. Get started by scheduling a free consultation or call us at 417-862-3706 for more information.