Your car isn’t just a car; it’s your independence, your ride to work, and a key part of getting your life together. If you’re behind on your auto loan and facing repossession, you may feel like you’re trapped in a downward spiral. But there is a way out – and a bankruptcy attorney at Benjamin R. Matthews & Associates can help.
If you’re facing repossession, bankruptcy should allow you to keep your car. Even if your vehicle has already been repossessed, bankruptcy may help you get it back. But there’s no time to lose. Contact us today for a free consultation.
When you file for bankruptcy, the court will immediately issue an “automatic stay” that blocks all collection activities, including repossession. That means they can’t legally repossess your car while the bankruptcy is pending. Even if they’re already physically on their way to repossess the car when the court order comes down, they have to stop.
The lender may file a motion in bankruptcy court to lift the stay, but even then, it buys you time to negotiate with the lender to keep your car or arrange alternative transportation if necessary.
If your car has already been taken from you, filing for bankruptcy may allow you to get it back. But, unfortunately, once the car is sold at auction – usually, that’s within a couple of weeks after it’s taken from you – bankruptcy generally can’t help you get it back. But if you file before the sale, you still have a chance to reclaim your vehicle, depending on how your bankruptcy case proceeds. That’s why you need to call a bankruptcy lawyer today to intervene before the sale.
If your car has already been sold, bankruptcy can still help by wiping out whatever remaining debt you owe on the car (called a deficiency balance). This can put you in a better position to buy another car or secure other transportation.
The point of bankruptcy is to give you a fresh start, and leaving you without transportation wouldn’t be conducive to that. That’s why South Carolina law provides a $6,325 vehicle exemption in Chapter 7 bankruptcy – so if your equity in the vehicle (that is, the difference between what it’s worth and what you owe) is no more than $6,325, you can protect it from being sold in bankruptcy proceedings. There is also a $6,325 “wildcard” exemption that you can use to protect any of your property, including your vehicle, so it’s possible to protect up to $12,650 in total. If you have more equity than that, there may also be other options.
In Chapter 13, you can generally keep your car; the auto loan is simply part of the Chapter 13 repayment plan. You may also qualify for an “auto loan cramdown” if you’ve owned the vehicle for at least 910 days (about 2.5 years). This means you only have to repay the vehicle’s current market value rather than the remaining loan balance. You may also be able to reduce the interest rate if it is more than 1 or 2 points higher than the current prime interest rate.
Timing is everything when you’re faced with losing your car or have already lost your car. We can often get our clients’ vehicles back even after repossession, but we must move quickly. Don’t risk your independence and your financial future. Contact us today for a free, confidential consultation.