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Auto repossession and chapter 7
Common questions regarding auto repossessions and filing a
chapter 7 are constantly asked, so we thought we would
address some of the more common scenarios in this section
in regards to what options an individual has when faced
with this issue.
What happens to an auto
that is repossessed before, during, or after a bankruptcy
case?
The answer depends upon which type of
bankruptcy that a person files. It also depends upon
whether or not the debtor wants to keep the vehicle or
simply let the vehicle go. The basic rule is as follows:
the debtor remains the owner of the vehicle until that the
vehicle is sold at auction. What this means is, the debtor
has the ability to recover that vehicle and negotiate with
the lender prior to the auto being sold at auction. This
assumes of course that the debtor has filed a bankruptcy
and that the automatic stay has gone into effect.
In a Chapter 7 case, whether or not the debtor can recover
the vehicle has to do with whether or not the debtor is
current on the payments and/or can become current. If the
debtor is behind on a vehicle in a Chapter 7 and the
vehicle is repossessed pre-petition, the lender will simply
bring a motion to modify the automatic stay, which will
allow that lender to be able to keep the vehicle from the
debtor. The debtor always has the ability to come up with
the past due amount and become current to recover the
vehicle, prior to the vehicle being sold at auction. The
most important question that the Chapter 7 debtor needs to
ask himself is can I get current on that vehicle to the
point where I can reaffirm the debt on that vehicle,
continue to make monthly payments on time going forward,
and maintain ownership of the vehicle. If the answer to any
of those questions is, no, it really makes sense to
surrender that vehicle back to the lender, because
eventually the lender is going to move to modify the stay
and repossess the vehicle down the road. Any balance that
was still due and owing to the creditor can be discharged
in the chapter 7, meaning, you will not be responsible for
the debt anymore.