It’s a good idea to take an honest look at your personal finances before you take any steps towards regaining ownership of your car. After all your car was repossessed because you were unable to maintain the payments on it, so unless your personal circumstances have changed dramatically you might need to reconsider any attempt on your part of getting back your repossessed vehicle.
If, however, you are confident that you will no longer default on your car loan there are steps you can take to get your car back, but you will need to act quickly.
Chapter 7 Bankruptcy
Although filing for Chapter 7 is usually used to discharge most of your outstanding financial liabilities, it can also be used to stop the lender reselling your vehicle once it’s been repossessed. The reason this happens is that filing for Chapter 7 bankruptcy means that an automatic stay is put on the activities of your creditors, preventing them from pursuing any further collection actions against you, and this also includes being able to sell your car.
This buys you enough time to do one of a few things. The first of these is to renegotiate new repayment terms with your lender on your car loan. This is called reaffirming the loan, but please do take legal advice before pursuing this option because if you default on your payments again the car will be repossessed, and you can’t use a Chapter 7 filing to have that debt discharged.
Another option is to use what’s called a cramdown, which is agreeing to pay your lender the current market value for your vehicle. In most cases the amount you owe on your car is far more than the current market value, saving you a small fortune in gaining ownership of your vehicle.
If you can’t negotiate with your lender to get your car back, then you also have the option of filing for Chapter 13 bankruptcy.
Chapter 13 Bankruptcy
This type of filing also places an automatic stay on your creditors, preventing them from pursuing you for immediate debts, including your car and the payments due on it. A vehicle is usually exempt from repossession if you can prove that you require it for either maintaining your family’s lifestyle and/or using it to get to work. Basically, if you can’t work then you can’t afford to make the repayments which are part of any Chapter 13 filing.
This type of bankruptcy filing does allow for the resolution of any arrears on your car repayments, but you also need to agree to keep up all future car payments.
You can also file what’s called a Motion of Overturn to have your repossessed vehicle returned to you once you can demonstrate in your Chapter 13 repayment filing how you plan on repaying the lender the money due to them.
A car loan cramdown is also an option for reclaiming your vehicle, in the same way that you would with a Chapter 7 filing. This basically means you agree to pay your lender the current market value of your vehicle, which is often a fraction of the total value of your car loan.
Another condition of filing for Chapter 13 is that you must agree to make what are called Adequate Protection Payments on your car loan while the trustee is organizing your repayment plan. It can take several months for a repayment plan to be confirmed and approved by both the trustee and the court, so these payments are financial protection for the lender while your Chapter 13 filing is being completed.