Bankruptcy can hold off repossession before it happens. If the vehicle has already been repossessed, two different bankruptcy chapters can help you – in different ways.
A chapter 7 bankruptcy case will protect the person whose vehicle has been repossessed from having to pay the lender for any shortfall on the car loan after the car is auctioned. A chapter 13 bankruptcy can actually get the repossessed vehicle returned to the owner, with the requirement that the chapter 13 payment plan propose to pay off the arrears on the vehicle loan, or in many cases, simply pay the car loan in full through the chapter 13 plan.
Any person thinking about filing a chapter 13 to get a repossessed vehicle returned to them needs to act fast – there is just a short amount of time between repossession and the end of the redemption period for a case to be filed.
And you don’t have to wait for a repossession to take advantage of chapter 13’s ability to re-write a vehicle loan. In some cases, a longer loan period, reduced interest rates and/or a reduced loan principal balance can be incorporated into a chapter 13 plan to make a car payment more affordable.