A vehicle may be one of the most important possessions you and your family have. It provides a means of transportation to your work, the grocery store, church, family, friends etc. But, a vehicle can be an expensive possession to have. Paying car payments on top of everything else you may owe can become burdensome. It is easy to get overwhelmed, begin missing your payments, and face the possibility of repossession.
If you are facing repossession, do not lose hope. Chapter 7 bankruptcy could provide you some help.
Chapter 7 Bankruptcy and Repossession
As soon as you file for Chapter 7 bankruptcy, an aspect known as the automatic stay will go into effect. The automatic stay is a court order issued to your creditors that immediately prohibits them from taking any collection actions against you during your bankruptcy case. This means your loan company cannot repossess your vehicle during your bankruptcy case without court approval first. Chapter 7 bankruptcy cases typically last between 3 to 4 months. So, your vehicle repossession could be delayed for that long, unless the car creditor seeks court approval sooner.
You may wonder how such a delay in repossession benefits you. The repossession delay could give you time to take some of the following actions:
Catch up on Delinquent Payments
During the extra time, you could save the money you do not have to pay other creditors to catch up on the vehicle loan arrearages. This would satisfy the lender and stop repossession after bankruptcy.
Negotiate with Your Lender
During the extra time, you could pursue different loan negotiation options with the lender. You could seek to reaffirm the loan. Reaffirmation creates a new contract for car payments hopefully under more agreeable terms. If the fair market value of your vehicle is less than the balance of your loan, you could seek to redeem your vehicle. The redemption allows you to buy your car from the lender at the fair market value, but you have to do so in one lump sum. Both of these options need approval from the bankruptcy court.
Surrender the Car and Buy Another One
During the extra time, you could save the money from not paying your car payment and other debts to buy another vehicle. Then you could surrender your current vehicle to the lender without obligation to repay the remaining balance.
How a Chapter 7 bankruptcy may benefit you depends upon your financial circumstances. Contact us for a free evaluation of your financial situation to see if Chapter 7 bankruptcy may help you.