WILL FILING FOR BANKRUPTCY GET BACK MY REPOSSESSED CAR?
March 21, 2022
The notion of filing for bankruptcy is not easy for most people, especially with the prospect that they could lose their assets and possessions. While the exact circumstances vary by state, in most cases, the answer is yes — filing for bankruptcy can assist you in getting your repossessed car back. The key is to act quickly and to know what you need to do to make this happen.
In order to act quickly and intelligently, you need the services of an experienced Texas bankruptcy attorney for detailed guidance. At Oliva Law Bankruptcy, we are committed to offering comprehensive legal guidance to clients in bankruptcy-related matters. Our team is available to discuss your unique situation and enlighten you about how you can get your possessions back. We proudly serve clients in McAllen, Corpus Christi, Harlingen, Brownsville, and throughout the Rio Grande Valley, Texas.
Bankruptcy Basics: Property Repossession
If you find yourself in a position where you need to file for bankruptcy, you likely have defaulted on your car loan. Once you default on your car loan, the lender can repossess your car. They may then sell it at auction to cover the remaining balance on your car loan.
One significant benefit of Chapter 7 and Chapter 13 bankruptcy is the bankruptcy-court-issued order called an "automatic stay." An automatic stay prohibits most creditors from engaging in collection activities, which gives you time to prepare and build your finances back to the point where you can get your car back.
Chapter 7
Chapter 7 bankruptcy, also known as “liquidation,” allows individuals to discharge most or all of their unsecured debt and find a fresh financial start. There are strict guidelines regarding who may qualify. Since Chapter 7 is one of the more expedient forms of debt relief, it is typically chosen by individuals wanting to rebuild their credit as soon as possible. There is no repayment plan with Chapter 7 bankruptcy, making it more appealing for individuals looking to start over.
Chapter 7 allows exemption of all of the equity you have in your car. If you can exempt all equity but are behind on your car payment, you can "redeem" the vehicle by paying the lender an amount equal to the current replacement value. Typically, filers get the lump-sum redemption amount from a family member or a bankruptcy redemption loan lender but expect a high-interest rate.
Chapter 13
The Chapter 13 bankruptcy process must be overseen and approved by a court. After analyzing your debts, expenses, and income, a repayment plan is approved by the court. You must then keep up with the monthly payments to pay off the balance. This process usually takes three to five years to complete and is overseen by a court-appointed trustee.
If the lender hasn't repossessed your vehicle when you file, the automatic stay should prevent them from repossessing it until the bankruptcy judge approves your Chapter 13 repayment plan. If your repayment plan includes making up any missed car loan payments, the lender can't repossess your car during the bankruptcy process or after it concludes (as long as you don’t get behind on payments).
If you're making payments but no longer want the car, you can give it back to the lender in Chapter 13. This is the route to take if the car is too costly or if it is not productive to keep (needs expensive repairs, etc.) It won't cost any more than you'd have to pay otherwise to return the car and wipe out the debt.
How Oliva Law Bankruptcy Can Help
Filing for bankruptcy in Texas involves a lot of complexities. Even though there is life after bankruptcy, it comes with some big changes, especially when it comes to your cars and other property.
With over 15 years of experience, Marcos Oliva of Oliva Law Bankruptcy has guided many clients through the bankruptcy process. If you are in McAllen, Texas, or anywhere else in the Rio Grande Valley, and need help getting back on your feet financially, call Oliva Law Bankruptcy today to schedule a free initial consultation.