Will Bankruptcy Stop Car Repossession?

car-loan-after-repossession

Several of our Indianapolis bankruptcy clients ask, “Will bankruptcy stop car repossession?”  The answer is YES, filing either an Indiana Chapter 7 or Chapter 13 bankruptcy will immediately stop an automobile from being repossessed.  When filing a Chapter 7 or Chapter 13 bankruptcy it is sometimes even possible to have a vehicle that was recently repossessed returned to you IF they have not yet sold the vehicle.

When you file a Chapter 7 bankruptcy the repossession is immediately stopped, and it is likely that the repossession can be postponed for 2-6 months.  If you cure the loan or come up-to-date on the loan before the bankruptcy case is closed, then you can usually keep the vehicle forever as long as you keep making payments on the loan until it is paid off.

Chapter 7 is not the only way to stop repossession.  Chapter 13 can be a very powerful tool to stop the repossession.  Chapter 13 not only immediately stops repossession, but it also has a mechanism in it that will restructure the vehicle payments.  This mechanism allows you to pay arrears (payments that are past due), and it also allows you to restructure the car loan so that you can pay it over time often in lower monthly payments.

There is one misconception that I would like to address about vehicles and bankruptcy.   Many times our clients are stressed out because they worry that they will lose their car if they file bankruptcy.  Most of the time you can keep your car when you file bankruptcy.  However, you must continue to make the payments either directly to the creditor or to the Trustee in Chapter 13 cases.  The rare time that you can’t keep your car when filing bankruptcy is if your car is very high-valued and paid-off.  In this rare circumstance, the vehicle’s paid-off value can exceed Indiana’s bankruptcy exemptions.  Since this is very rare, you can almost always keep your cars when you file for bankruptcy.

If you are behind on your vehicle and it is going to be repossessed, there is still hope.  Don’t hesitate to give our office a call today to schedule a free face-to-face consultation.

-Indianapolis Bankruptcy Attorney John Bymaster