There can be no more sickening feeling than to discover that your car or truck has been repossessed. In Georgia, where I practice, self-help repossession by vehicle lenders can occur quickly and with no prior notice. Specifically, in Georgia, lenders do not need to file any paperwork in court, nor do they need any permission to repossess your car. If your account is delinquent – even by one day – you are at risk. Note that every state has its own rules about vehicle repossession.
Generally, “first tier” lenders like GMAC, Ford Motor Credit and Toyota Motor Credit do not look to repossess your vehicle if you are a few days or even a few weeks late. These lenders do not want to scare off new business with aggressive collection techniques and, in my experience, they will make some effort to work with you to bring your account current.
Second tier lenders, such as “buy here, pay here” finance companies often take a much harder line on delinquencies. Years ago, I was introduced to the owner of one of Atlanta’s largest “buy here, pay here” vehicle finance companies. He told me in no uncertain terms that if a customer was one day late, his agents would be on the phone demanding payment and if the account was not brought current within a day or two, he would send out an agent to repossess the vehicle.
In this financier’s mind, every minute of delinquency represented a risk that the vehicle would be stolen, damaged or left uninsured. He wanted a reputation as a lender who would not negotiate or re-work finance deals. In his mind, customers with poor credit had very few options when it came to financing cars and trucks and he had the upper hand in setting the terms of the deal.
To compound this problem, a default in payments also resulted in an acceleration of the entire balance of the loan. Thus, a vehicle owner in Georgia could fall behind by a day or two, lose his car to repossession, then find himself with around ten days to come up with the funds to pay off his vehicle, or face losing any right of redemption. Not a pleasant scenario, to be sure.
Not surprisingly, I get a regular stream of calls from distressed owners who have lost their cars to repossession and want to know what they can do to get back their cars or trucks. Unfortunately, in Georgia at least, there are not that many great options other than paying off the vehicle, reaching an agreement with the lender or filing Chapter 13.
For many of the folks who call me, Chapter 13 is the only viable option. Because Chapter 13 does create an automatic stay the minute it is filed, a secured lender who has taken possession of a vehicle cannot sell it without first getting relief from the automatic stay.
Generally, when I file a Chapter 13 to get a car, truck or motorcycle back, I will immediately file an action in Bankruptcy Court called a “Compliant for Turnover.” In this Complaint, I will allege that my client needs his vehicle to get back and forth to work and thus needs it to fulfill his obligations under the Chapter 13 plan. I will also assert that the vehicle is properly insured per Georgia law and that the proposed plan offers the secured creditor “adequate protection.”
Adequate protection in Chapter 13 can be a moving target but I have had success arguing that the creditor will be paid in the plan faster than the car will likely depreciate.
Most of the time, lenders will voluntarily return the repossessed vehicle after receiving my Complaint for Turnover, but occasionally I have to argue the issue before a Bankruptcy Judge.
Obviously, I can present a much more aggressive plan prior to repossession and filing early will avoid the two or three week delay in getting the vehicle back. But if there is no other choice, Chapter 13 can solve an otherwise unsolveable problem.
by Jonathan Ginsberg, Ginsberg Law Offices, Atlanta, GA.