Can Bankruptcy Stop Repossessions?
Counsel from a Bankruptcy Attorney Serving Oklahoma
When debts begin to pile up and start to become overwhelming, sometimes consumers can fall behind on payments, especially expensive car payments. This can lead to creditors taking actions to collect what they are owed. In some cases, this can involve repossessions, which means the lender will take back the vehicle they were allowing you to pay off over time. Fortunately, filing for bankruptcy can help individuals who are both facing repossession and have recently had their vehicle repossessed.
At Alexander Hilton & Associates, we have been faithfully advocating for consumers for more than two decades. We understand how important it is to keep vital assets like your home and your vehicle, especially when trying to work to pay off debt, rather than gain more. Without transportation, you could be out of a job and face even more uncertainty. That is why our Oklahoma City bankruptcy attorney is here to help you exercise your legal rights and utilize legal strategies to protect your possessions.
How Automatic Stays & Repayment Plans Works
By filing for Chapter 7 or Chapter 13 bankruptcy, an automatic stay is put in place. Once this has been issued to creditors, they are required to cease all collection action against you. That means they cannot repossess your vehicle until further notice. In cases of Chapter 7, you may be able to use exemptions to keep your car instead of liquidating it to pay off creditors. In Oklahoma, the maximum value is $7,500 for individuals and for $15,000 married couples. If the value of your vehicle exceeds this exemption, you will be required to pay off the remaining amount or may have to liquidate it if you cannot.
If your car has been repossessed already, you can do the following to get it back:
- File for Chapter 13 bankruptcy
- Demonstrate that your vehicle is necessary to your household
- Create a repayment plan that will cover back and future payments
- File a motion for turnover ordering the lender to return your car
You will need to work with a well-experienced bankruptcy lawyer in Oklahoma City who knows how to effectively petition on behalf of their clients in such matters and has experience handling repossessions.
What if I keep my car but the payments are still too high?
When filing for Chapter 13, you may be able to use a car loan “cramdown,” which will essentially reduce your car loan to the actually value of the car. This would make the repayment plan much more reasonable, especially if the car has lost a significant amount of value. For example, say you got a $25,000 loan to pay for a new car several years ago. Now, the car has depreciated to a value of $8,000, but you still owe $18,000. By using a cramdown, you can eliminate the $10,000 difference and reduce your loan amount to only $8,000. You can also get your interest rate lowered in bankruptcy court using this tactic. However, to be eligible to cramdown, you must have bought your car around two and a half years before filing for bankruptcy.
Want to learn more about keeping your vehicle or reducing your car loan payments? Alexander Hilton & Associates can keep you informed! Begin by filling out a free case evaluation.