An automobile can be among the most important assets for a working person. Wage earners often need reliable transportation for the commute to work and car repossession can make a bad financial situation disastrous. Thankfully, the United States Bankruptcy Code provides for an automatic stay that can prevent your lender taking back your car and selling it through a repo sale. In almost all circumstances, the filing of a bankruptcy case effects an immediate stay of most creditor collection efforts, including vehicle repossession.
A borrower who is dramatically behind on his or her car payments may wish to take advantage of a federally sanction repayment plan under chapter 13. A debtor in a chapter 13 bankruptcy repays some or all debts over a period of three to five years. A chapter 13 plan also allows debtors to cure the arrearages on car payments. Debtors who successfully complete all payments under their chapter 13 plans are awarded a completion discharge. With certain exceptions, a discharge in a case under chapter 13 eliminates most unsecured debts.
A chapter 7 bankruptcy filing will also trigger the automatic stay. Similarly, the successful conclusion of a chapter 7 case includes a discharge. While a debtor’s personal obligation to pay a vehicle can be discharged in a bankruptcy case, a bankruptcy discharge alone does not avoid a lien on a debtor’s automobile that was perfected prior to the filing of the bankruptcy case. For that reason, a debtor who receives a discharge but does not make any car payments may have his or her vehicle repossessed when the automatic stay is modified or dissolved.
An individual confronted with a possible vehicle repo should consult with an experienced bankruptcy attorney. Bankruptcy lawyers may also be able to review past vehicle repossessions to determine whether borrowers may have claims against their lenders for their conduct in repossessing and selling vehicles. For example, a recent class action in the United States District Court for the Western District of Pennsylvania asserts claims against Wells Fargo on behalf of borrowers who had their vehicles repossessed in Pennsylvania. A Pittsburgh bankruptcy attorney can quite often help people who want to avoid a vehicle repossession. Call today for a free consultation.