If you're considering bankruptcy, you are likely wondering how debt collection actions currently being taken against you will be impacted by your filing. You have every right to understand the benefits bankruptcy provides, including its ability to stop processes like foreclosures and car repossessions. Below, three things to know about bankruptcy and vehicle repossession are explained in detail.

What You Need to Know About Bankruptcy & Vehicle Repossession

1. An Automatic Stay Is Issued

When you file for bankruptcy, the courts issue an automatic stay on any repossession action being taken against you. This is true whether you file for Chapter 7 bankruptcy (debt elimination) or Chapter 13 bankruptcy (debt reorganization). The stay buys you time to reconsider your financial situation and decide whether it is in your best interest to keep your vehicle or liquidate it to help pay off some of your debt.

2. You Should Alert Your Vehicle Lienholder

If you are at risk of losing your vehicle, be proactive. Your attorney will contact your vehicle creditor to let them know you are filing bankruptcy. Your creditors will understand the processes involved with an automatic stay. This keeps you on top of any issues before they start and ensures you can keep your vehicle and avoid a run-in with repossession agents.

3. A Vehicle Repossession During an Automatic Stay Is Illegal

The stay is in place to safeguard you and your rights as a consumer. If your lienholder repossesses your vehicle in spite of a stay, they are in violation of federal law. Act quickly, and update your bankruptcy lawyer about the situation; you could potentially be awarded all costs associated with the repossession, attorney's fees, and even, in some cases, punitive damages.

Frances H. Hollinger, Attorney at Law is a bankruptcy lawyer helping residents in Foley, AL, find viable solutions for debt relief. Call (251) 943-9030 or visit her firm online to arrange a consultation and discuss your situation with a bankruptcy professional. Don't let a vehicle repossession affect your ability to live and support yourself; call Attorney Hollinger today to start exploring your options.