Various individuals have a common question: Can my car be repossessed during bankruptcy? However, in most cases, an individual's car will not be touched even if a person owes payments on it. When you file for Chapter 13 bankruptcy in Michigan, it prevents creditors from collecting a car due to the automatic stay, which prevents a car loan lender from repossessing an individual's car.
Chapter 13 and Repossession
Filing for chapter 13 bankruptcy will stop collections for loans, credit card debt, and foreclosure sale and prevents a lender from repossessing your car.
If the bank offering a person a loan fails to repossess a car, and a person has completed the process required to file for bankruptcy, an automatic stay is integrated. An automatic stay is a regulation in which a segment of the bankruptcy proceeding prevents a lender from repossessing an individual's car during the case proceeding.
A judge offers a person the payment amounts and repayment plan, and the lender is expected to accept the new repayment time and amount based on an individual abiding by the new payment terms; the lender will fail to repossess your car at any time.
Repossession Before a Bankruptcy Case
A vehicle can be repossessed before an individual's bankruptcy case is determined in court. In the given scenario, it is still possible to get the car back. However, you will have to wait until a judge reaches a decision concerning your case in determining the appropriateness of the repayment schedule and amount.
During this period, a lender is expected to return your vehicle and to be in accordance with the newly arranged payment plan. If you abide by the new payment guidelines and avoid defaulting on the arrangement, the lender will fail to take the car.
You can redeem your car in chapter 13 bankruptcy and repurchase it for its fair market value. The method fails to apply to everyone since it is required to file a motion with the court and pay the total amount in just one payment. The option is effective when a car's worth is significantly less than the loan balance. While redeeming your car by paying the lender the market value, you will be comfortable owning it for free and clear after Chapter 13 bankruptcy, avoiding the risk of losing a car through repossession.
