When you finance your vehicle, missing a couple of payments could mean that you no longer have reliable transportation. Once you default on your financing, the lender can repossess the vehicle, as it serves as collateral for your loan.
If you believe you are at risk of vehicle repossession, you will need to act quickly to prevent the loss of your vehicle. Chapter 13 bankruptcy can be the ideal tool for someone who wants to keep their vehicle despite falling behind on payments.
How does Chapter 13 bankruptcy help?
There are two main ways that a Chapter 13 bankruptcy will help you keep your vehicle when you fear an imminent repossession. The first is the automatic stay you receive when you file.
The courts will grant you a stay that will stop all collection activity, including pending lawsuits and repossession attempts. Although the lender can potentially go to court and ask for permission to repossess the vehicle during your bankruptcy, they likely will wait until after the courts decide on a repayment plan.
The second benefit is how Chapter 13 bankruptcy gives you leverage to rework your loan. Your lender may be more cooperative about extending the repayment period or moving the missed payments to the end of the loan instead of forcing you to pay them all at once when you have no resources to do so.
By filing Chapter 13 bankruptcy before the lender takes your vehicle, you potentially protect your investment while reorganizing your finances so that you won’t miss payments again. Learning the basics of Chapter 13 bankruptcy can help you decide if it is the right solution for you.