Filing for bankruptcy can stop repossession temporarily through what is known as the automatic stay. The automatic stay is an injunction that goes into effect immediately upon filing for bankruptcy, regardless of the type of bankruptcy you file Chapter 7 or Chapter 13.
The automatic stay prohibits creditors, including auto lenders, from continuing or initiating collection actions against you, including repossession, foreclosure, wage garnishment, lawsuits, and harassing phone calls.
So Here’s how the automatic stay affects repossession: First, when you file for bankruptcy, the automatic stay temporarily halts the repossession process. If your lender has not yet repossessed your vehicle, they cannot do so while the automatic stay is in effect.
Second, the automatic stay provides you with an opportunity to negotiate with your creditors, including your auto lender, to potentially keep your vehicle or work out a modified payment plan. It’s important to note that while the automatic stay can provide temporary relief from repossession, if you fail to make payments as required by the bankruptcy plan or if you’re unable to reaffirm the debt or redeem the vehicle, the lender may seek permission from the bankruptcy court to lift the automatic stay and proceed with repossession.
Additionally, If your vehicle has already been repossessed before you file for bankruptcy, the automatic stay may still provide some benefits. It can prevent the lender from selling the vehicle immediately and may give you an opportunity to negotiate with the lender or pursue options to get the vehicle back.
It’s essential to consult with a qualified bankruptcy attorney to understand how bankruptcy may affect repossession and explore your options for dealing with debt and protecting your assets. Contact Bononi & Company, P.C. today for a personalized debt consultation.
If you have any questions about the topic discussed in this article, or any bankruptcy law matter, please give us a call at Bononi & Company 724-832-2499.