Can bankruptcy help prevent my car from being repossessed?

According to The Washington Post; “A record 7 million Americans are 3 months behind on their car payments” – February 2019. That headline says it all. In other words, if you file for bankruptcy and have missed your car payments, but still want to keep your car, you’re not alone.

The Credit Union Journal has a recent article in the May 2019 issue titled; “By avoiding subprime auto loans, are credit unions avoiding their roots?” It turns out auto loan defaults are once again at all-time highs. This is a national problem for lenders, and not just locally here in Ventura County or Los Angeles County.

There are legal remedies you can take to prevent your car from being repossessed. Many consumers don’t realize that under Chapter 7 and Chapter 13 Bankruptcy, you can temporarily prevent your lender from repossessing the car. This is because during bankruptcy proceedings, the court issues an “automatic stay” that bars and prevents the lender from repossessing your car. The lender can ask the court to remove the ‘automatic stay’ and, if the court agrees, the lender can take possession of the car anyway, but this temporary stay may be all you need to get the lender’s attention to work with you and your attorney on a modified payment plan.

The best way to deal with this situation is to contact your car lender, and it’s best to go through a bankruptcy attorney, it carries more weight. It also prevents the lender from trying to intimidate you. Your attorney can renegotiate the terms and help you set up a new payment structure, allowing you to keep your car in bankruptcy.

Consider, if you will, that the lenders really don’t want to repossess the cars, they’re not in the car business, they’re in the lending business, they just want to get paid, as per the original agreement. If they realize that’s not going to happen, they’ll weigh their options and consider what’s best for them. Perhaps a reduced interest rate, reduced balance, or renegotiated terms are better for the lender than a repossessed used car with a low resale market value due to wear and tear and depreciation. Face it, lenders don’t want to lose more money than is absolutely necessary.

Another important point to remember; The ‘automatic stay of bankruptcy’ is only temporary, and if you haven’t made your payments on time, once your case is closed you can expect the lender to demand the car back or they will repossess it. Also note that the stay is only valid during bankruptcy proceedings, which for Chapter 7 lasts about 3 months.

What is the best way to avoid car repossession during bankruptcy court proceedings?

• make the payments
• Make up the late payment
• Create a payment plan, ask the court to approve it
• Stay in touch with the lender through your attorney
• Ask for help maybe paying interest only for a couple of payments
• Renegotiate car loan
• Ask the court if you can buy your car back for its fair market value (Trading in your car under Chapter 7 Bankruptcy Law).
• Ask your bankruptcy attorney about cramdown strategies in Chapter 13 bankruptcy

What can you do if your car is repossessed before the bankruptcy filing date?

Ask your bankruptcy attorney to help you work out a payment plan so that the lender can recover the missed payments. If this has happened to you, and your car has already been repossessed, don’t delay. Call your bankruptcy attorney now! That is probably the best advice of all.

Summing it all up!

You must know your rights and understand the motivations of your lender. You need a good, solid bankruptcy attorney working for you, one who has dealt with local lenders here in Ventura and Los Angeles County. An attorney who understands and has decades of experience. With the right strategy, you can keep your car, avoid humiliation, and avoid losing your means of transportation. After all, we live in California and you need a car.