One of the most common concerns among bankruptcy filers is the potential of losing their property after filing the case. Our clients obviously rely on their vehicles to go to and from work and home. Some people file bankruptcy with their vehicle loans already in default. When it comes to preventing repossession during bankruptcy, what is the best advice?
Our goal is to inform our clients about all aspects of bankruptcy. Having the correct information helps individuals to make educated decisions while avoiding potentially harmful information. There are a lot of misunderstandings about Texas repossession law. Any property encumbered by loans, like automobiles, furniture, and appliances, may be subject to repossession by a creditor if you default on your payments. If you are late or otherwise default on your loan contract, repossession may occur without warning.
If you fall behind on payments on your car or other collateral, the first step is to contact your creditor. The creditor is not required to cooperate with you, even if it’s only a temporary problem. If they do, be careful to have any arrangement in writing, as creditors may still seize your property after accepting partial payment.
Filing bankruptcy will stop any repossession attempt, at least temporarily. Either a Chapter 7 or Chapter 13 bankruptcy will give you the opportunity to become current on your car or other collateral payments to completely avoid repossesion.
If you have missed more than one or two payments and are looking to avoid repossession, contact Acker Warren, PC, as soon as possible to learn about your options. Your initial consultation is always complimentary.
Keeping Your Car With An Automatic Stay
When filing for a Chapter 7 or a Chapter 13, an automatic stay goes into place that stops all creditor collection actions. This is a shield for the debtor from creditors’ continuing to call and other debt collection activities including repossession. However, the debtor’s ability to keep the automobile depends on whether the repossession procedure has begun when the automatic stay kicks in.
Using Bankruptcy In Your Favor
Even if you willingly surrender your car, the creditor may sell it at auction. You may still owe them if it sells for less than the sum on your loan—plus any expenses connected with repossession and storage. Anyone who co-signs on a loan is equally liable for the debt.
Chapter 7 bankruptcy allows you to discharge that deficiency balance. This can be extremely beneficial as these deficiency balances oftentimes reach $10,000.00 or more.
If you file a Chapter 13 bankruptcy, you may be able to avoid repossession if it has not yet been repossessed. It will allow you to restructure your loan and pay it off over time, sometimes at a cheaper interest rate or for the vehicle’s fair market value. Because timing is crucial, you should contact an attorney as soon as possible.