Filing for Chapter 7 bankruptcy can help you get back on track when you’re unable to pay your monthly bills. But can it stop a car repossession?
Yes – but only temporarily. Your auto loan lender can obtain court permission to repossess your vehicle at any point. And if you aren’t making timely payments or your car loan is in default, this is likely to happen.
The good news is that, when you file for Chapter 7 bankruptcy, you have options to put a permanent stop to car repossession.
Filing for Chapter 7 Bankruptcy Temporarily Stops Car Repossession
Immediately after you file for Chapter 7 bankruptcy, an automatic stay goes into effect. This court order stops your creditors – including your auto loan lender — from taking any action to collect the debts you owe. While you’re under the protection of the automatic bankruptcy stay, your car cannot be legally repossessed.
However, you may not be able to keep your vehicle for long. At any time, your lender can file a motion for relief from the bankruptcy stay. If your auto loan is in arrears, the judge will probably allow the car repossession.
Options to Avoid Car Repossession During Chapter 7 Bankruptcy
If you want to try to keep your vehicle after filing for bankruptcy, you have a few options. These include:
Get your loan out of default
Catching up on your payments can stop repossession. However, if you’re pretty far behind, this may not be practical or affordable.
Negotiate with your lender
Your auto loan lender may work with you to come up with a mutually agreeable arrangement to keep your car. Keep in mind, though, that by reaffirming your debt, you will remain liable for the loan even after receiving your bankruptcy discharge.
Redeem the vehicle
If your vehicle is worth much less than the amount you owe, filing for bankruptcy allows you to buy the car for its fair market value. To go this route, however, you need to be able to make the purchase with a single lump sum payment.
An Experienced Bankruptcy Attorney Can Help Stop Car RepossessionÂ
In Utah, the bankruptcy motor vehicle exemption allows you to protect up to $5,000 in equity of one car, or up to $10,000 if you file a joint bankruptcy petition with your spouse. Utah’s tools of the trade exemption can protect an additional $5,000 in value for a vehicle used for business.
Experienced bankruptcy attorneys understand these exemptions and can employ them to help you keep your car or protect your vehicle equity. If you’re filing for Chapter 7 in an effort to stop repossession, advice from an expert lawyer can make all the difference.
Are you thinking about filing for Chapter 7 bankruptcy? The Law Office of Davis & Jones, P.C., has successfully guided more than 20,000 Utah residents through the process. Our expert attorneys can answer all of your questions and help you decide on the best course of action to get the fresh financial start you need.
The Law Office of Davis & Jones, P.C., offers free bankruptcy consultations at our Salt Lake City office. If you live in northern Utah and want to talk to an experienced Chapter 7 bankruptcy attorney, contact us today.