Secured creditors have a lien on the collateral which was given for the loan. If the payments are not made in accordance with the purchase contract, the lender can repossess the collateral. Unlike, a real estate loan, the lender does not have to give you advance notice.
If you are behind on your car payment, the lender could send a “repo-man” any time, day or night, to haul away the car. You could be coming out of the grocery store with your groceries, expecting to drive home and discover your car has been repossessed.
Under chapter 13 of the Bankruptcy Code, you could obtain the return of your car after it has been repossessed. However, this can only be done if the lender has not already sold the car. Therefore, time is critical and the bankruptcy must be filed soon after the repossession in order to force the lender to return the car.
Chapter 13 bankruptcy would involve a reorganization plan which would require you pay the arrears over the next 5 years. If the car was purchased more than 910 days prior to the date the bankruptcy was filed, the amount to be repaid to the lender will only be the fair market value of the vehicle and not the full amount owed. The difference between the fair market value and the remaining amount due on the loan will be categorized as unsecured debt and will be treated the same as the credit card companies.
Filing bankruptcy under chapter 7 of the Bankruptcy Code will eliminate the unsecured debts and will usually allow you to keep your car if you can remain current with the car payments. If you are behind on your car payments, filing bankruptcy under chapter 7 will not help you keep your car. However, it will delay any action to repossess until the lender obtained permission from the Court to take the vehicle.
Call 480-755-8000 to speak with our Arizona debt relief attorney today for immediate help.