If your car loan lender obtains permission from the court, they may be able to repossess your car during Chapter 7 bankruptcy. But there are options to avoid this. If you have questions about car repossession after Chapter 7 bankruptcy, contact Gregory J. Wald Attorney at Law today.
What Happens to Your Car During Bankruptcy?
When you file bankruptcy, the judge issues an automatic stay, which will halt all legal actions against you, including car repossession. Your lender must work within the framework of the bankruptcy in order to get money or the car back.
Through Chapter 7, much of your debt will likely be discharged. However, this does not include your car loan. You may have to sell your car and pay the lender the amount, or give the lender back your car. In some situations, you may affirm your debt with the car loan lender and keep your car. Your lender will likely offer reasonable payments and you will have to enter a new payment plan.
During bankruptcy, you may also be able to redeem your car for fair market value. If you wish to keep your car and you have some money you can put towards its purchase, then the lender may allow you to pay the value of the car and keep it. In order to do this, you must file a court motion and make a payment in lump sum. This may be an option if your vehicle is worth a lot less than the loan balance.
In limited circumstances, a lender may ask the court to allow them to repossess your car during your bankruptcy. They can do this by filing a “Motion for Relief from Automatic Stay.” If the judge grants that motion, then the lender may be able to repossess your car during Chapter 7.
A judge can exclude your car from your bankruptcy. If this happens, you may resume payments to the lender or renegotiate the payment terms. Often, your bankruptcy lawyer can handle this situation along with your bankruptcy.
Can a Lender Repossess Your Car After Bankruptcy?
What about car repossession after Chapter 7 discharge? If the majority of your debt was discharged in Chapter 7, you may still have a car loan outstanding. If this is the case, and you default on that loan, then your lender can repossess your car. Even if you have renegotiated the terms of your loan, if you default after bankruptcy, then the lender can repossess your car.
How to Prevent Repossession After Bankruptcy
If you are facing potential repossession, what can you do to prevent it?
Cure Your Default
First, you can cure your default. The car lender will only want to repossess your car if the loan is in default. If you can catch up on your payments or remedy your past due status on your car loan, you may be able to avoid repossession. This can be difficult, however, especially if you are significantly behind on payments.
Negotiate With Your Lender
Second, you can negotiate with your lender. Your lender likely knows that you’ve recently filed Chapter 7 bankruptcy, so they are aware that you have dealt with difficult financial situations. They may be willing to renegotiate the terms of your loan. Oftentimes, the lender will roll past due payments into the loan and allow you to make lower payments. This may be accomplished with a lower interest rate or by extending the loan terms. Sometimes it’s best to let a lawyer handle renegotiation of your loan terms.
Call Us If You Have Questions About Car Repossession After Chapter 7 Discharge
Although the automatic stay may protect your car during Chapter 7 bankruptcy, your car may be open to repossession after discharge if your car loan remains and you default on payment again. If you are facing car repossession after Chapter 7 discharge, a Minnesota bankruptcy attorney can help. Contact Gregory J. Wald Attorney at Law today.