Falling behind on car payments can put your vehicle at risk of repossession. For many people in New Albany, losing a car can also make it harder to get to work, take children to school or handle daily needs. Bankruptcy may provide a way to pause collection efforts, including some repossession actions. However, the protection does not always mean you can keep the vehicle permanently.
How bankruptcy can pause repossession
Filing for bankruptcy generally triggers an automatic stay. This stay stops most collection actions against you and your property while it remains in effect. A lender generally cannot continue efforts to repossess your car during the stay without getting permission from the bankruptcy court.
However, timing matters. If a lender already repossessed your vehicle before you filed, filing bankruptcy does not automatically undo the repossession. The circumstances of the repossession and the type of bankruptcy you file can affect what happens next.
Keeping your car after filing
Bankruptcy can pause a repossession, but keeping the car requires more than stopping the lender temporarily. Your options may depend on whether you file Chapter 7 or Chapter 13 and whether you can keep up with the loan.
Chapter 7 can clear certain debts, but it does not automatically remove the lender’s claim against your car. If you want to keep the vehicle, you generally must continue meeting the loan terms or take another option allowed under bankruptcy law.
Chapter 13 works differently. Eligible individuals can create a repayment plan that generally lasts three to five years. The plan may help you catch up on past-due car payments while keeping the vehicle.
Several factors can affect what happens to your car after filing, including:
- Whether the lender has repossessed the vehicle
- Whether you have missed any payments
- Whether you can afford the car payments
- Whether you qualify for Chapter 7 bankruptcy
- Whether you qualify for Chapter 13 bankruptcy
Reviewing the loan documents, payment history and timing of the repossession can help show how bankruptcy may affect your vehicle. Legal assistance can also help you compare your options based on your debts, income and car loan.
Keeping the wheels turning
Bankruptcy may give you time to address a car loan before you lose your vehicle. Still, the automatic stay has limits and does not erase the lender’s rights in the car. Understanding how those rules apply to your specific situation can help you make informed decisions about your vehicle and your debts.
