Can I Use a Bankruptcy Filing to Keep My Car from Being Repossessed?
You’re in dire financial straits because of the loss of a job, an illness or injury, a divorce or some other unforeseen challenge. You’re behind on credit card, mortgage and car payments, and you’re scared every time you go out to your car, afraid it will have been repossessed. Can a personal bankruptcy filing stop a repossession effort? Can your lender seek permission from the court to take your car anyway?
Using Chapter 7 to Stop Repossession
If your car has not been physically repossessed, a Chapter 7 or Chapter 13 bankruptcy filing will prevent the lender from proceeding with repossession, even if you have received notice that your car may be taken back. That’s because the automatic stay in bankruptcy immediately goes into effect when you file. The automatic stay prevents all your creditors from initiating or continuing legal action to collect a debt. Unless your lender can convince the bankruptcy court to lift the automatic stay, your car will be protected for as long as you remain in bankruptcy.
When Might the Court Lift the Automatic Stay on Your Car?
It’s important to understand that a bankruptcy filing only affects your obligation to pay the debt. It will not extinguish any lien that a creditor may have. Accordingly, if you have pledged the car as collateral and the lender has a lien on your car, the court may lift the stay to allow the creditor to enforce the lien. However, for that to happen, the lender must also show that it will lose money if the default is not remedied, or the loan payments are not made.
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we provide personal bankruptcy counsel to men and women throughout the state of New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
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