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Understanding bankruptcy and vehicle repossession

When you fall behind on your car payments, the lender may be entitled to repossess your vehicle. At the Ammerman & Goldberg “Bankruptcy” Law Office, we know how vital your vehicle can be, transporting you to work and other important commitments. Fortunately, you might have options to stop that repossession, including bankruptcy.

There are two typical situations in which bankruptcy will affect a repossession. In the first, you have simply defaulted on your payments and your car has not yet been seized. Filing for a Chapter 7 or Chapter 13 bankruptcy will put an automatic stay on all your debts, including your vehicle. In this case, repossession is illegal. Further, if you file for Chapter 13 and develop a repayment plan that addresses your back payments, the creditor cannot repossess your car once the filing is complete as long as you make your payments on time.

In the second scenario, you have filed for bankruptcy after your car was repossessed. In some situations, if the car was seized shortly before the filing, you may be able to get it back. However, as the Federal Trade Commission notes, it is easier to stop a vehicle repossession than try to get your car back afterward.

The FTC encourages consumers to try to work with creditors at the first sign of trouble. If your financial situation is dire, you should speak with a professional as soon as possible to determine the best course of action. For more information on this topic, please visit our page regarding the benefits of filing for bankruptcy.

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