How To Use Bankruptcy To Avoid Repossession
You’ve lost your job or suffered a serious injury or illness, and it’s put you in financial distress. You may have fallen behind on your auto payments, with your lender threatening to take back your vehicle. How can you use the bankruptcy process to avoid repossession of your car, truck, or motorcycle?
The Immediate Impact of a Bankruptcy Filing
When you file for protection under U.S. bankruptcy law, you’ll immediately be protected by what’s known as the automatic stay. The automatic stay prevents your creditors from calling, writing, or taking legal action to recover a debt, except through the bankruptcy process. It’s important to understand, though, that the automatic stay applies only prospectively—it will not allow you to get back your car if it was repossessed before you filed for bankruptcy.
Keeping Your Car in a Chapter 7 Bankruptcy
With a Chapter 7 filing, you can permanently extinguish debt in exchange for the relinquishment of non-exempt property. Texas has the most generous exemptions in the nation, which typically means that you can claim an exemption for the full value of a car for each licensed driver in the home. The exemption, though, only prevents the bankruptcy trustee from selling the car—it doesn’t eliminate the car loan lender’s lien on the car. So if you’re behind on your car payments, the lender may ask the bankruptcy court to lift the stay so that it can repossess your car.
Also, in a Chapter 7 bankruptcy, you may enter a reaffirmation agreement in which you renew your promises to make your car payments. If you fail to honor the reaffirmation agreement, your car can be repossessed.
Keeping Your Car in a Chapter 13 Bankruptcy
With a Chapter 13 petition, you generally get to keep all your assets and make new payment arrangements with your creditors. Your car will typically be protected as long as you make the agreed payments. If you fail to honor your repayment agreements, the bankruptcy may be terminated and the automatic stay will go away.
Contact an Experienced Rockwall, TX Bankruptcy Lawyer
At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment to discuss your rights and options in bankruptcy, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County, and the surrounding counties.
