My vehicle was repossessed, and I do not want it back, should I file for bankruptcy?

Maybe, depending on the advice of your bankruptcy attorney.

When a vehicle is repossessed and sold in Texas, it must be sold at public auction.  A public auction usually results in a sale that is significantly less than the value of the vehicle if sold through a dealership or private sale.

This means that most Debtors who have a vehicle repossessed will owe what is called a deficiency balance.  This balance is the difference between what the car sold for at auction and what is owed to the Creditor on the note that was signed by the Debtor. This amount can often be significant. In a bankruptcy proceeding this amount is treated as an unsecured claim, like a credit card.

These amounts can be discharged in a Chapter 7 Bankruptcy without repayment, presuming the Debtor qualifies for a Chapter 7 case.  A car repossession deficiency balance, because it can be so high and burdensome to repay, is a common reason for filing Chapter 7 Bankruptcy.

This amount can also be discharged in a Chapter 13 Bankruptcy .  Depending on the Debtor’s situation, income, and expenses, the creditor owed money for the repossessed vehicle may receive some distribution on their claim in a Chapter 13 Bankruptcy.  For a more detailed analysis of your situation, please contact our office and one of our attorneys can meet with you and discuss your options relating to a repossessed vehicle and any other credit issues that you may have. From there we can help you formulate the game plan that best fits your needs.

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