Repossessions in Bankruptcy

Repossessions happen when you can’t afford to pay for a vehicle that you purchased with a car loan. There are two types of repossessions: a voluntary surrender and an involuntary repossession. A voluntary surrender usually occurs when you decide not to pay for the vehicle any longer and take it to the creditor on your own. An involuntary repossession is when you default on your loan and the creditor hires a repossession company to come get the vehicle.

Can They Come on My Property Without Any Notice?

Yes, they can come on your property to reclaim the vehicle as long as they don’t breach the peace or use threats of force and violence. 

What Defines a Loan Default?

A loan default is determined based on the terms of your loan agreement. A loan default can occur from missing one payment or not having insurance, among other things. 

Are there Ways To Stop A Repossession While In Default?

The Creditor may offer several ways to cure the default. If the creditor is reaching out to you because you are in default they may offer multiple ways to cure the default. Some common examples are adding the missed payments to the end of the loan, waiver of missed payments, or filing bankruptcy. 

What Happens After They Take My Vehicle?

After the vehicle is returned to the Creditor, the Creditor will attempt to sell the vehicle for a fair market value. 

Will I Still Owe on the Repossessed Vehicle?

Yes. After the car is sold, the creditor will send you a notice showing the deficiency left on the loan. The deficiency is calculated by taking how much you still owed on the vehicle loan plus any fees associated with the repossession of the vehicle while deducting the amount the vehicle was sold for. The deficiency is how much you still owe for the vehicle. 

I Voluntarily Surrendered the Vehicle, Do I Still Owe the Deficiency Amount?

Yes. Even if the vehicle is voluntarily surrendered, you will still owe the deficiency amount. 

My Vehicle Has Been Repossessed, Can I Get It Back?

Your Creditor will be able to tell you any options to get it back. So options include reinstating the loan, redeeming the loan, or bidding at the auction. To reinstate your loan, your Creditor will probably require that you pay the past-due amount on your loan plus the repossession costs. To redeem the vehicle, you will need to pay for the full amount owed on the loan plus the repossession costs. If the lender sends the car to auction, you can attend and try to bid on the vehicle. 

How Does Bankruptcy Help?

A bankruptcy can help in one of two ways with repossession. 

If you file a bankruptcy prior to actual repossession of the vehicle, you can avoid the vehicle actually being repossessed. If you file a Chapter 13 bankruptcy, you can pay the past-due amount through the bankruptcy plus possibly pay off the loan. If you file a Chapter 7 bankruptcy you can temporarily stop the repossession but if the default is not cured, the Vehicle will still be repossessed. 

If you file a bankruptcy after you receive the deficiency notice, your debt becomes an unsecured debt which can be discharged in either a Chapter 7 or a Chapter 13. 

How long does a Vehicle Repossession Stay on Your Credit? A repossession can stay on your credit for up to seven years from the date of the first missed payment.