Bankruptcy comes with a variety of common issues that people worry about, such as losing your house and car. It is possible that your car can be repossessed before you file bankruptcy and people are worried that they have to give it up during a bankruptcy. This may not be the case depending on your circumstances, and you should be able to keep your car. Here is what you can do about car repossession before and during bankruptcy.
Bankruptcy Stops Most Repossessions
If you are in danger of losing your car due to debt problems, one possible solution is to file for bankruptcy. When you file bankruptcy, all collection efforts on any debts that you owe stop immediately. That means that your car cannot be repoed once you file and are approved to start the process.
There Are Asset Protections During Bankruptcy
Your car and several other assets are protected during the bankruptcy process. Debt collectors cannot repo your car, and you may be able to keep your car throughout bankruptcy. Minnesota lets you exempt cars under a certain value so that you will be able to keep at least one to drive every day.
It is important to note that if you have multiple personal vehicles or a vehicle above the value threshold, your car(s) may not be protected. That means that you may have to surrender luxury vehicles that are not your daily driving vehicle to help pay your debts.
What Happens If Your Car is Repoed Before Filing Bankruptcy?
If a company repoed your car before you filed for bankruptcy, you may be able to get it back. Once it is taken, the company has to either sell or auction the vehicle off to pay off your debt. If the company has not done that yet, you may be able to recover the vehicle in the bankruptcy process.
Buying the Car Back in Bankruptcy
If a car is not exempt from the bankruptcy process, it still cannot be repossessed. Instead, it goes into a trust with the other assets that are going to be liquidated to pay your debts. In short, those assets are sold for the highest value that the trust can get for them, which means they are likely going to be auctioned. You have the option of participating in the auction to get your car back, or you can offer the trust a higher value than it can get at auction. Either way, being the highest bidder on your vehicle means that you can recover your car.
Work With a Bankruptcy Attorney For Positive Results
Bankruptcy can be an effective way to protect your car and other assets from being repossessed. However, you must talk to a bankruptcy attorney as soon as possible to see if bankruptcy can help you. At Kain + Henehan, we work with clients in Minnesota to minimize the impact of bankruptcy and help them get their finances in order. Contact Kain + Henehan by calling (612) 438-8006 or filling out the online form to see what you can do to protect your assets.
