How to Prevent Car Repossession
If you've fallen behind on your car payments, your creditor may have the legal power to take possession of the vehicle without notifying you. One way some people have stopped car repossession is filing bankruptcy.
Filing bankruptcy may:
Stop car repossession and allow an owner to retain his/her vehicle, stop creditor lawsuits, and reduce car loan monthly payments/interest.
Cars in Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, some owners keep their vehicles and continue making payments, while others surrender the vehicle to eliminate debt.
Reaffirming the Debt
One option in Chapter 7 bankruptcy is to reaffirm the automobile loan. This is done with a reaffirmation agreement, which is a voluntarily contract between the debtor and the car loan creditor.
In this agreement, the debtor agrees to pay the balance owed on the car loan. As long as the payments on the vehicle are made as promised, the vehicle will not be repossessed. However, reaffirmation of debt is not required.
Generally, debt that is reaffirmed is not discharged under Chapter 7 bankruptcy. If car payments are not made after the debt is reaffirmed, the creditor may repossess the vehicle and sue for any deficiency balance after the car is sold at an auction.