When you file for bankruptcy under Chapter 13, you often wonder if your car is safe from being taken over. Or if you recently lost it as a result of a takeover or bankruptcy under Chapter 13 will help you recover it. Can bankruptcy stop repossession of vehicle?
Automatic Stay stops taking over the car
After filing for bankruptcy under Chapter 13, the court issues a decision called ‘automatic stay’, which prohibits recovery attempts. The stay applies to most creditors and debt types, but not all.
For example, a stay will stop the collection of credit card debts and other loans, as well as sales by way of execution. It will also prevent the lender from taking over the car.
However, your stay will not stop criminal activities, child custody or visits, and, depending on state law, some eviction proceedings.
How can the lender get permission from the court to take over the car?
A lender who wants to take a car during bankruptcy proceedings must ask the court to abolish the automatic stay and allow the lender to take over the car. The lender does this by submitting a ‘court application for an automatic stay’. In the application, the lender must show that this is the correct interest side with the right to take over the car and that his interests are not properly protected because you are not paying off loans on time or otherwise the way you fail to meet your obligations.
Usually you have about two weeks to oppose the lender’s relief request. If you object, the court will usually set a trial within thirty days of the date of submission of the application and service. The judge may reject the application if you can show that it was procedural defective (for example, it was not properly noticed and served) or the lender made a mistake, for example by improperly paying your payments.
If your car was taken over before filing for bankruptcy
If your car was taken over before you went bankrupt, you may be able to get your car back by filing for bankruptcy. But you must act quickly. Basically, once the car is auctioned, you won’t get it back. The time between acquisition and auctioning varies by state, but is often around 10 days.
From a legal point of view, if you have unpaid car shares, the lender must return the car because it is part of the bankruptcy estate and the acquisition is considered unlawful. (Illegal preferences mean that the creditor was “preferred” to receive payment within 90 days of bankruptcy. The trustee has the right to decide who receives the payment, not the creditors.) In practice, however, lenders do not return the car without a court order, which usually means that you will need a lawyer.
Using a car is easier thanks to filing for bankruptcy
Redeem your car as you complete Chapter 7, so you will only have to pay the actual cash value of your vehicle. This can be very helpful for people who are very underwater in connection with a car loan. Savings can be in thousands.
If you have a friend or relative who can lend you money or a financial institution that wants to lend you money, you may be able to save the car.