Depending on where you live, owning a car is often necessary for getting to work, school and for running errands. A repossessed car can make a difficult situation even worse. Not only are you struggling to make ends meet, but now you have no way to get to work to make money.
Repossession is upsetting and even scary for some people. However, you may be able to get your car back by filing for bankruptcy. Here is an overview of your options.
Repossessed Cars Explained
When creditors repossess your car, they usually tell you how much you must pay to get the vehicle back. This is usually the amount by which you fell behind, plus any fees they tack on as a result.
If you do nothing, the car will be auctioned off. If they get less for the car than you owe on the loan, you’ll be presented with a vehicle loan deficiency—in other words, a bill for the remaining balance.
Chapter 13 Bankruptcy
If your car has been repossessed and you want to get it back, you can file for Chapter 13 bankruptcy. This is often not worth the cost of the Chapter 13, though a Chapter 13 may be very worthwhile if the default involves your home. Note that this type of bankruptcy allows you to keep some of your assets, such as your home and car. However, in either case, you will repay your creditors over the next five years through an agreed-upon payment plan. If you fall behind on those payments, your bankruptcy claim can be dismissed, and your assets repossessed.
Chapter 7 Bankruptcy
If your car has been repossessed, and you don’t want to keep it, filing for Chapter 7 bankruptcy will eliminate the need to pay the vehicle loan deficiency. If you qualify for Chapter 7 bankruptcy, you may be required to sell some of your assets, but you will typically be permitted to keep most of those assets. Any proceeds are used to repay your creditors—even if you can’t raise the full amount—and your debts are permanently discharged.
In short, it may be possible to get your repossessed vehicle back by filing for bankruptcy. However, it’s important that you talk to an attorney first. Bankruptcy can wipe the slate clean and give you a chance for a fresh start, but each type comes with its own special rules and obligations. You need to understand what you’re agreeing to before you can make the right decision for your situation.
For help with bankruptcy and vehicle repossession, turn to Dworken & Bernstein.