People often think that filing for bankruptcy means saying goodbye to all of your possessions. How do you get yourself out of debt if you don’t give up everything you own to be sold in bankruptcy court? In some cases, it’s true that you will need to relinquish assets. In Chapter 7 bankruptcy, selling your assets allows you to pay off your primary and secure debts, which wipes out your debt and lets you start over. But what if you have assets that you’d like to keep, such as your car? You may be behind on payments, and you might have even had your car repossessed. But that doesn’t mean there isn’t a way to keep it; if your car has been repossessed but not yet sold, you may still be able to get it back.
How a Chapter 13 Bankruptcy Can Help
When you file for Chapter 13 bankruptcy, you are given a chance to make good on the secured debts you owe by establishing a payment plan that allows you to make payments you can afford. While it may take you a while (most payment plans last 3-5 years,) you not only get a second chance to keep some of your assets, but you may see some additional benefits, such as reducing the interest rates on your payment plans or shedding some tax liabilities. A Chapter 13 repayment plan could help you keep your car, even if your lender has already repossessed the vehicle.
When your car is repossessed, the lender turns around and sells the car in order to recoup some of the money owed on your loan. However, the lender generally needs to wait for a short period time after repossession before being allowed to sell the car. If you act quickly, you could file for Chapter 13 during this time period, which would put an automatic stay in place on all your debts and keep the lender from selling your car without first obtaining permission from the bankruptcy court. This will give you some time to come up with a repayment plan to present to your lender and the court.
The lender will likely ask permission to sell your car, but the court may rule in your favor if:
- You can prove you need the car – for example, if your car is your sole means of transportation to and from your job, you may get to keep the car because you need to work in order to keep current on your bankruptcy payment plan.
- You can prove that your payment plan is affordable enough to allow you to keep current on your car payments.
In your payment plan, you may need to agree to pay your arrears on your loan, as well as any fees associated with repossessing the vehicles. Because your car can depreciate in value while you wait to have your repayment plan approved, you might also be required to make adequate protection payments to protect your lender from losing money due to depreciation. Adequate protection payments will usually be made by your trustee before your plan has been approved.
There are still some instances where a lender may not want to return your car; usually this is the case if the lender feels its needs have not been adequately covered by the repayment plan, but it could be due to other factors. If you really want to keep your car, you will need to make sure your lender is on board with your plan.
Contact a Cleveland Bankruptcy Attorney
If your car has been repossessed and you really want it back, you need to act quickly. It would be in your best interest to contact a bankruptcy attorney immediately after repossession to discuss your options. Therefore, if you decide to file for bankruptcy, your attorney can help you file fast enough that you remain within the time period after repossession where your lender may not sell the car. If you wait too long, your car can get resold and you’ll be stuck without it.
The bankruptcy attorneys at Luftman, Heck & Associates have helped countless other Ohio residents figure out how to file for bankruptcy without having to lose all their possessions. Contact them today to see how they can help you, too. For a free consultation, call (216) 586-6600, or email firstname.lastname@example.org.