Great Bankruptcy Options To Deal With Repossessed Auto

If your car has been repossessed and you’re considering bankruptcy, there are a few options within the bankruptcy framework that might help you manage or potentially recover your vehicle. The specific strategy would depend on whether you’re filing for Chapter 7 or Chapter 13 bankruptcy:

Chapter 7 Bankruptcy Options:

1. Redeeming the Vehicle:

1. • In Chapter 7 bankruptcy, you have the option to redeem the vehicle. This means paying the lender the current market value of the car in one lump sum, even if it’s less than what you owe on the loan.
   • This option can be challenging since it requires paying a significant amount of money at once, but it could be beneficial if the car is worth much less than the loan balance.

1. Reaffirming the Debt:

1. • You might choose to reaffirm the auto loan, which means you agree to continue making payments on the loan as if you had not filed for bankruptcy. In return, you can keep the car.
   • Reaffirmation removes the loan from the bankruptcy discharge, so you’ll still be liable for the debt. It’s essential to be confident you can make the payments, or you risk future repossession without the possibility of discharging the debt in bankruptcy again.

Chapter 13 Bankruptcy Options:

1. Cramdown:

1. • If your car loan is more than 910 days old (about 2.5 years), you might be eligible for a cramdown, where you pay the lender the current market value of the car through your Chapter 13 repayment plan, not the total balance owed.
   • This can lower your payments and potentially reduce the interest rate, making it more affordable to keep the car.

1. Repayment Plan Inclusion:

1. • In Chapter 13, you can include your car loan in your repayment plan, spreading out the arrears over the life of the plan (3-5 years). This can make catching up on missed payments more manageable.
   • If the repossession has already occurred, you might be able to get the car back if you act quickly and the car hasn’t been sold yet. You’ll need to propose a plan that pays off the car loan and any repossession costs over time.

General Considerations:

• Act Quickly: Time is of the essence after a repossession. The lender may sell the vehicle at auction soon after taking it, so you’ll need to decide your course of action quickly.
• Legal Advice: Consulting with a bankruptcy attorney can provide you with guidance tailored to your situation. They can help you understand the nuances of each option and what’s feasible based on your financial circumstances.
• Assess Your Needs: Consider whether keeping the vehicle is essential. If there are more affordable transportation options, it might not be worth the effort and cost to recover or keep the car through bankruptcy.

Bankruptcy offers several tools to deal with a repossessed auto, but the best option depends on your specific circumstances and the type of bankruptcy you’re filing. Whether it’s redeeming the car in Chapter 7, cramming down the loan in Chapter 13, or another strategy, it’s crucial to evaluate the costs, benefits, and risks associated with each option.

Repossessed Auto