If you’re in this situation, you might be wondering if filing for bankruptcy can stop repossession. The answer is yes, bankruptcy can help prevent repossession, but the specifics depend on your circumstances and the type of bankruptcy you file.
When you file for bankruptcy, an automatic stay is put into effect immediately. This legal action halts most collection activities, including repossession. The automatic stay is designed to give you breathing room while you sort out your financial situation. Here’s how it works:
Automatic stay: As soon as you file for bankruptcy, the court issues an automatic stay that stops creditors from pursuing collection activities. This includes repossessing your car or other secured property. If the repossession process has already started, it must stop once the stay is in place.
Chapter 7: If you file for Chapter 7 bankruptcy, the automatic stay will temporarily prevent repossession. However, since Chapter 7 involves liquidating assets to pay off debts, you could still lose your vehicle unless you can catch up on the missed payments or negotiate with the lender.
Chapter 13: Filing for Chapter 13 bankruptcy provides more long-term protection against repossession. Under Chapter 13, you propose a repayment plan to the court that lasts three to five years. This plan allows you to catch up on missed payments over time while keeping your vehicle. As long as you stick to the payment plan, your car or other assets will not be repossessed.
While bankruptcy provides powerful protection, there are situations where it might not completely stop repossession:
Multiple bankruptcy filings: If you’ve filed for bankruptcy multiple times within a short period, the automatic stay may be limited or not apply at all. This prevents people from abusing the bankruptcy system to avoid paying debts.
Lender’s Motion to Lift the Stay: In some cases, the lender can ask the court to lift the automatic stay. This allows them to proceed with repossession. The court may grant this request if the lender can prove that their interests are not being adequately protected, especially if you’re unable to make payments under the terms of your loan.
Inability to afford the payments: Bankruptcy can stop repossession temporarily, but if you cannot afford the payments required under a Chapter 13 plan or catch up on missed payments in Chapter 7, you might eventually lose your vehicle.
If you’re facing repossession, it’s crucial to act quickly. Filing for bankruptcy before the repossession takes place can give you the best chance to keep your vehicle. Waiting too long can complicate your situation, especially if the repossession process has already begun.
If you’re worried about repossession, don’t wait until it’s too late. The Law Offices of Robert M. Geller can help you understand your options and guide you through the bankruptcy process. Contact us today to schedule a consultation and take the first step toward stopping repossession and reclaiming control of your finances.
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