Help! My Car Was Repossessed! Can Bankruptcy Help?

03 Aug Help! My Car Was Repossessed! Can Bankruptcy Help?

The last thing you are thinking about is bankruptcy. It’s early in the morning and you are just stepping out of the door to go to work and your car is not where you left it!

First thought: Was it stolen?

Oh, no! You knew that you were a couple of months behind on your car payments and the creditor was calling but you didn’t quite expect this! So, you go back inside and call the creditor who says that you can get the car back by paying the amount of the debt in full. What now?

Chapter 13 bankruptcy does offer the potential to get your car back. But you have to act quickly!

Normally, once a car is repossessed, the creditor will send a notice to you telling you that you have a certain amount of time in which to pay the debt in full (redeem the collateral) or make arrangements to retrieve any personal property in the vehicle. The notice will also say that the creditor will dispose of the car with ten days (time periods may vary depending on state law). This is set forth under each state’s statutory scheme under the Uniform Commercial Code under Article 9. If you do not redeem the car or make some arrangements with the creditor, the vehicle will be sold. At that point, there is not much anybody can do including a bankruptcy attorney.

So, you have a limited amount of time. You immediately make an appointment with a bankruptcy attorney. After paying the required attorney’s fees and the costs for filing bankruptcy and credit counseling, the attorney needs files your case quickly. The creditor is contacted along with the repossession agent and informed not to dispose of the collateral.

At this point, districts across the country have their own requirements about how to deal with the situation but a fairly standard resolution is that upon presentation of proof of insurance and payment of the repossession and storage fees, the vehicle will be returned to the debtor. Sometimes, these fees and costs can be made part of the “secured claim” for the vehicle and paid through your bankruptcy plan. However, it is best to be prepared to pay the storage fees and repossession fees up front. Sad to say that this situation occurs on a frequent basis. In fact, it has been the subject of numerous posts on this blog such as here and here.

So, what can be done to avoid having to file for bankruptcy to save your car? Without sounding too flippant, pay the car creditor and the vehicle probably will not get repossessed. If that is just not working, you know that you are behind on your car payments–consult with a bankruptcy attorney sooner rather than later. Many people think that things will turn around and hope that, with just a little more time, they can catch up the missed payments. Hopefully, that will be true but if not, by talking with an attorney, you can have a back-up plan.

As indicated above, if your car is repossessed prior to filing bankruptcy, it can be expensive to get it back. It can be expensive for two reasons. First, in order to file bankruptcy, you will have to pay the attorney and the filing fees to the court along with the credit counseling fees. Then, depending on how your district handles things, you may have to pay several hundred more dollars for the storage and repossession fees in order to get the car back.

To quote Benjamin Franklin, “an ounce of prevention is worth a pound of cure.” If you know that your finances are spiraling down, talk with a bankruptcy attorney before your car gets repossessed.

 

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Adrian Lapas, Esq.

I've been practicing bankruptcy law in North Carolina since 1993, and am certified as a specialist in consumer bankruptcy law by the North Carolina State Bar.
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