Discharging Debts

Will Bankruptcy Stop my Car from being Repossessed?

It is possible that bankruptcy can stop the reposession of your car, but the details depend on what kind of debt you owe on the car. A loan that uses your car as collateral is called a “secured loan.” This means that the loan is secure for the lender because they will take you car if you stop making payments. A car loan is a typical type of secured loan – you buy a car, take a loan out on it, and if you can’t make your payments the lender takes the car back to cover their costs. You may also have a personal loan which uses the car as collateral (title loans are a common example).

No matter what kind of loan you have, if it uses your car as collateral, you will need to pay off that debt in order to keep your car. However, by filing bankruptcy you may be able to fix your personal finances and be able to afford your loan payments. If you are looking to file bankruptcy, but you think you can still afford your car payment, you may want to review when you should consider bankruptcy. It may or may not be the right option if you have the cash flow needed to make your payments.

How do I keep my car after Bankruptcy?

The details of how to keep your car after bankruptcy depend on what kind of bankruptcy you file. If you file a Chapter 7 Bankruptcy, you typically give up your car and discharge the debt owed on it. But you have the option of reaffirming that particular debt, which means that you agree to pay the debt and catch up on your payments. This is a complicated process and will require you to negotiate with your lender, so having an attorney to act as your agent here could be helpful.

Using Chapter 13 to keep your Car

Another possible option to keep your car after bankruptcy is to file Chapter 13 Bankruptcy (instead of Chapter 7). Talk to your attorney about the differences between the two! A quick description is that Chapter 13 means that you may keep your house, your car, and other property, but you’ll need to make payments on the loans. Chapter 13 is essentially a way to renegotiate your loan terms and payments to a level that you can afford so that you can keep these possessions.

Chapter 13 Bankruptcy could be a way for you to restructure any debts that you owe on your car, allowing you to catch up on payments and keep your car. You’ll need to talk to your attorney about how much debt you owe on the car, when you made your last payment, and how much the car is worth. Your exact situation and the details about your vehicle will guide your decision.