If you’ve ever had a car repossessed, you know that it’s an experience that can leave you feeling confused and overwhelmed—and not just because of the legal implications. For many people, having their car taken away is a real blow to their sense of personal security, especially if they rely on it for everyday transportation to work, school, or shopping. Repossession can also result in significant damage to your credit score.
If you’re anxious about being able to keep making your monthly payments and avoiding having your car repossessed, here are some ways you can prevent repossession on your car loan using bankruptcy protection and other means.
What is Repossession?
Car repossession is when creditors take back their collateral after defaulting on a loan. This can happen when you don’t make your monthly payments or if you don’t comply with other terms of the contract. When this happens, the creditor can take possession of the asset used as collateral for the loan—in this case, your car.
How Chapter 13 Bankruptcy Can Help
If you’re worried about losing your car to repossession, filing for Chapter 13 bankruptcy might be an option for you. Once your petition for Chapter 13, the court issues an order known as an “automatic stay” that prevents debt collectors from contacting you.
If the lender hasn’t repossessed your vehicle when you file for bankruptcy, the automatic stay prevents them from repossessing it while the bankruptcy court accepts your Chapter 13 repayment plan. If your repayment plan covers any missing auto loan payments, the lender cannot repossess your vehicle during or after bankruptcy.
On the other hand, there are preemptive methods to avoid repossession you can take even before bankruptcy comes into play. Here are some other options:
- Communicating With the Lienholder. Some lenders are willing to decide with people who have difficulty making payments through an adjusted payment plan or enabling a grace period where you may pause your payments.
- Refinancing With a Different Lender. If you can refinance your car loan, you may be able to get lower monthly payments that may be easier for you to manage.
- Selling the Vehicle. You may be able to get more than what your lender would pay for it in a repossession sale. Your buyer may be willing to pay enough to pay off what you owe on the note completely, and if they pay more, you may have equity left over that can go towards the purchase of a new vehicle.
Contact Hoverson Law Offices, P.A.
If you are facing repossession, an experienced attorney at Hoverson Law Offices, P.A. can help you gain peace of mind by learning more about your options and rights.
We target Minneapolis, Bloomington, and the surrounding Minnesota communities.