Can Lender Repossess My Car in Bankruptcy?

Dear Driving for Dollars,

I am behind on my car loan and other bills. I'm worried my car will be repossessed, and then I'll have no way to get to work and I'll get further behind in debt. Will filing for bankruptcy protect my car from repossession?

-- Billy

Dear Billy, It's likely that bankruptcy will protect your car from repossession, but only if you stay current on your car loan payments. Filing a Chapter 13 bankruptcy would allow you to pay off the balance over three to five years.

When you file for Chapter 7 bankruptcy protection, most creditors are prohibited from trying to collect on your debt through something called an automatic stay.

Because of the automatic stay, the only way a lender can repossess your car is by getting the court's permission to do so. However, many lenders do request permission and have it granted by the court if you are behind on your payments.

You may still be able to avoid having your car repossessed by showing that you need it to get to work to pay off your debt, but you would need to renegotiate the terms of your car loan with your lender, catch up on the payments or possibly even buy the car for its fair market value.

Consult a bankruptcy attorney to discuss your options to help you decide when and if you should file.

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