Can You Avoid a Vehicle Repossession During Bankruptcy?

Repossession of a vehicle can cause significant hardship on individuals who rely on it for transportation. Therefore, the Castle Law bankruptcy professionals provide insight into how Chapter 7 and Chapter 13 Bankruptcy could potentially offer relief before, during, or after repossession.

Typically, repossession occurs when a lending institution or leasing company seizes a vehicle from the borrower due to failure to meet specific terms agreed upon during purchase. When a loan is taken out to buy a car, the lender holds a stake in the vehicle. If payments aren't made as agreed, the lender has the right to reclaim the car. Bankruptcy doesn't usually modify this security interest. Instead, the bankruptcy trustee focuses on the equity in the car, which is its value minus the outstanding balance. If your car is repossessed and you intend to file for Chapter 7 or Chapter 13 bankruptcy, seeking advice from a bankruptcy attorney may be crucial.

Chapter 13 Bankruptcy:

• Lets you create a repayment plan for your debts that fits your budget.
• Stops most repossession efforts by lenders once you file.
• Protects you from the lender taking other actions to collect the debt.
• If you're considering Chapter 13, call us to speak with a bankruptcy attorney at Castle Law Office and see if it's a viable option for you.

Under Chapter 13, individuals can often negotiate a repayment plan with creditors tailored to their financial circumstances. Filing for Chapter 13 triggers an automatic stay under the Bankruptcy Code, preventing lenders from repossessing vehicles or taking other punitive measures outlined in purchase agreements. To explore whether Chapter 13 is suitable for your situation, consult with one of our bankruptcy attorneys.

Chapter 7 Bankruptcy:

• Eliminates your personal responsibility for most debts, including car loans.
• This means the lender can still repossess your car if you stop paying, but they can't sue you for the remaining balance if they sell it.

For those opting to maintain regular car payments under Chapter 7, lenders may require reaffirmation of the car loan to retain possession. While Chapter 7 discharge relieves personal liability on the loan, lenders still retain the right to repossess and sell the vehicle if payments aren't made. However, they cannot pursue legal action for any shortfall if the sale proceeds fail to cover the entire loan balance. To determine if Chapter 7 bankruptcy aligns with your financial needs, contact one of our bankruptcy attorneys.

If you're facing challenges with credit card debt, Castle Law Office is here to guide you through Chapter 7 and Chapter 13 Bankruptcy options. Contact us today for a free consultation by calling 816-842-6200 or emailing us to schedule an appointment. Please note that our services are currently limited to clients within the Kansas City DMA.