My Car is Going to be Repossessed: Can Filing for Bankruptcy Help Me?
My Car is Going to be Repossessed: Can Filing for Bankruptcy Help Me?
While filing for bankruptcy can be a solution in some situations involving the repossession of a vehicle, it may only be a temporary fix in other situations. Whether bankruptcy can help you depends largely on your overall financial situation and your ability to continue to pay for the vehicle, if you wish to keep the vehicle. The type of bankruptcy that you choose to file will affect your ability to avoid a repossession of your vehicle.
Understanding the Car Repossession Process
Colorado state law and the terms of your loan agreement determine the process that creditors must follow in the repossession of a vehicle. Generally, once your car payment becomes 10 days overdue, the creditor, or the company that holds the vehicle loan, can send you a Notice of Right to Cure the Default. This notice tells you that your payment is late and you need to pay the late payments as well as any current payments that are due, along with any late charges. Under Colorado state law, if you still have not paid all of the late and current payments that you owe 20 days after the creditor issues the Notice to you, the creditor can begin the process to repossess your car and accelerate your car loan, or make the loan balance due all at once. This means that the creditor is free to come and take your vehicle from you at any time. The creditor then will sell the vehicle and apply the proceeds from the sale to your outstanding loan balance.
Filing for Chapter 7 Bankruptcy
If you choose to file for Chapter 7 bankruptcy, the U.S. Bankruptcy Court will issue an automatic stay, which prevents your creditors from taking any further collection actions against you until the bankruptcy case is resolved. This means that once the automatic stay is in place, the creditor cannot repossess your vehicle, even if you have not made the payments as agreed. The automatic stay can give you a month or two of relief from repossession, which can be helpful in some situations.
You will ultimately have to decide whether you can afford to make up the loan payments that you missed and continue to make the current loan payments as they become due. If you cannot make the payments, then the creditor will still be able to repossess the vehicle after your bankruptcy is final. In this situation, the only benefit of a Chapter 7 bankruptcy is that you won’t be held responsible for any deficiency, which is the difference between your loan balance and the amount that your creditor received from selling your vehicle. You will be able to discharge that debt in bankruptcy, which prevents the creditor from suing you or garnishing your wages to recover the deficiency.
Filing for Chapter 13 Bankruptcy
If you have the income to repay the late payments, as well as your current loan payments, then you may wish to file for Chapter 13 bankruptcy. During a Chapter 13 bankruptcy, you get to keep the property secured by the loan as long as you are making your payments as agreed. A repayment plan can last anywhere from three to five years, so you will be able to keep your car during that repayment period. However, if you aren’t going to be able to make your car loan payments, along with your other debt payments as set up in your Chapter 13 bankruptcy repayment plan, then Chapter 13 bankruptcy probably isn’t the best idea for you.
Consult a Colorado Bankruptcy Attorney Today
Since every situation is different, only a Colorado bankruptcy lawyer can help you determine which course of action is right for you and your family. If you are facing a vehicle repossession or another type of creditor collection action, we can help. Contact Kealy Law Center right away and we will help you explore all of your available options.