If you have fallen behind on your car payments, your vehicle may be in danger of repossession. It is not uncommon for people to experience changes in their financial circumstances that lead to longer than expected turmoil. Bankruptcy is an option that may enable you to keep your vehicle out of repossession.
Depending on how dire your circumstances seem, you may benefit from Chapter 7 or 13 bankruptcy. Here’s how bankruptcy helps those in danger of losing their cars.
Stops collections and repossessions
Immediately after you file for bankruptcy, an automatic stay goes into effect that stops creditors and lenders from pursuing their collection attempts. The stay is only effective for as long as your bankruptcy case is active or approved. Failure to complete the terms of your bankruptcy ruling could void the automatic stay and allow lenders and creditors to resume their collection demands, including foreclosure and vehicle repossession.
Provides extra time
Chapter 13 bankruptcy is ideal if you anticipate being able to bring your car note current within a few years. It does require you to repay what you owe over an extended period of time. If you do not expect your finances to improve any time soon, you may find Chapter 7 bankruptcy a better fit for your circumstances. It allows the lender to repossess your vehicle and discharges the debt.
In order to use Chapter 13 bankruptcy to avoid repossession, you and your lender must work out a new repayment agreement. The lender is under no obligation to do so. If the lender decides that it is in their best interest to repossess your vehicle due to delinquency, then you must surrender the vehicle to them.