When you get behind on payments for an automobile or other secured credit purchase, the lender can initiate property repossession. Once the car or property is under their control, they’ll typically sell it to recover all or part of the amount owed. Many people faced with repossession wonder if declaring bankruptcy can halt the proceedings. Here’s what you should know. 

Chapter 7 Bankruptcy

Filing for Chapter 7, or liquidation bankruptcy, can help you avoid property repossession if you file before the car is repossessed. It creates an injunction called an automatic stay that halts all creditor collection activities for 30 days. The creditor will likely file a motion to lift the stay, but the injunction should give you time to pay for the vehicle in a lump sum—at the current, depreciated value rather than the outstanding loan amount—or to renegotiate the terms of the loan. If the vehicle has already been repossessed before you file for bankruptcy, you must act immediately, as it will typically be offered for auction within a week or so. 

Chapter 13 Bankruptcy

Chapter 13 is called "reorganization" bankruptcy, and it allows people with a reliable income to renegotiate repayment terms. Filing for Chapter 13 will likewise initiate a stay that prevents the lender from repossessing the vehicle until the judge has approved new repayment terms. As long as the repayment plan includes the arrearage and you make protection payments to cover the car's depreciation during this period, the lender cannot continue with property repossession. Similar to Chapter 7, if the lender has repossessed the car before you file for Chapter 13, you must act quickly if you hope to get it back before it's auctioned. Contact an experienced attorney immediately.

If you’re behind in payments and facing property repossession, get in touch with Padgett & Robertson, Attorneys at Law in Mobile, AL.  They've been serving Southern Alabama for more than 35 years and also specialize wage garnishment, medical bills, and foreclosures. Visit their website for answers to frequently asked questions about bankruptcy. Call (251) 342-0264 to schedule a free consultation with a detailed financial analysis of your situation. 

No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.

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