A common question that debtors ask is whether filing for bankruptcy can stop their vehicle’s repossession. Whether pursuing this option will help depends on how far behind you are in making payments and how willing your lender is to work with you.
What happens when you file for Chapter 7 bankruptcy?
You’re likely constant creditor calls and letters if you’re struggling with crippling debt. One of the best aspects of filing Chapter 7 bankruptcy is that creditors will stop trying to reach out to you by either mail or phone regarding your debts. An automatic stay goes into effect until your debts have either been reaffirmed or discharged. That can buy you time if you’re nearing repossession on your vehicle.
What happens to your financed vehicle when you file bankruptcy?
A bankruptcy filing is initially nothing more than a “stay” or “hold off period” in the debt collection process. It will temporarily stop your auto finance company from collecting any money you owe them and repossessing your car.
Your auto lender is likely to file a motion of relief of automatic stay in your bankruptcy case. If you’re unable to show a good reason to prevent the lender from repossessing, the trustee may eventually allow the lender to proceed.
Is there any way to avoid repossession during bankruptcy?
One option for keeping your vehicle is to redeem your car. This process involves you paying your lender the cash value of your car. It can save you thousands of dollars if you can find a way to do so.
Filing for a different type of bankruptcy, such as Chapter 13, may be an option for holding on to your car as well, as it involves you reaching an agreement with your lender to restructure your loan.
Coming to terms with the reality that you’re drowning in debt and have little to no prospect to pay under the current times can be a hard pill to swallow. An attorney can help you sort out what you can expect to happen with your car and other assets if you decide to file bankruptcy here in Hixson or anywhere else in Tennessee.