Clients will commonly ask us how to stop car repossession. Often, filing for Chapter 7 or Chapter 13 bankruptcy protection can be used to stop car repossession. When a bankruptcy case is filed, it immediately stops any form of repossession of vehicles no matter how far behind the car payment may be or how high the outstanding balance is. In addition, the bankruptcy chapter you file can make a large impact on what options are available for keeping your car, including paying less on the loan & interest rate, or simply getting rid of the car payment obligation all together. For more information on how to stop car repossession contact a bankruptcy attorney in Tampa to schedule a consultation.
How to Stop Car Repossession with Chapter 13 Bankruptcy
Chapter 13 is the most common option for borrowers seeking to stop car repossession. The Chapter 13 option allows a owner to have up to 5 years to pay off the car loan- so in most cases, this provides the time for the owner to catch up the payments by spreading the payments over a new 60-month loan. The 60 month loan is often a vital tool borrowers can use when trying to figure out how to stop car repossession. Most of the time, the interest rate applied is around 6%. In addition to an interest rate reduction, an option known as a “cramdown” can reduce the total loan balance as well.
The cramdown option essentially pays the value of the vehicle, instead of the total balance on the loan. To be eligible, there is a “910” rule stating that the purchase of the car must be at least 910 days (roughly 2.5 years) prior to the filing date of the Chapter 13 bankruptcy petition. See bankruptcy law 11 US 1325. If you purchased your car more than 2 & ½ years ago, this option will likely help you budget to keep the car with a much lower payment.
How to Stop Car Repossession by filing Chapter 7 Bankruptcy
Chapter 7 has traditionally been the option for surrendering a car in jeopardy of repossession (ie, wiping out the car debt, but ultimately having to give up the vehicle within about 4-6 weeks after filing). However, section 11 U.S.C. 722 of the bankruptcy code allows what is called a “redeeming” of the car- essentially, a new loan that pays just the value of the vehicle (like the cram down in Chapter 13), rather than the outstanding loan balance. For example, if a car is worth $5,000 but has a lien of $18,000, the 722 redemption option allows for a new loan to be set at the $5000 amount of the car loan and the $13k difference is discharged and erased in the bankruptcy, substantially reducing the amount the owner has to pay in order to pay off the car and receive the car title. See Bankruptcy law 11 USC 722
In Chapter 7, there is no 910 rule, so you won’t need to wait 2.5 years to use this option. For more information about the 722 redemption or other options on how stop car repossession contact a bankruptcy attorney in Tampa.
Tampa Bankruptcy Law Firm
If you are at risk of losing your vehicle to repossession contact Florida Law Advisers to speak with a bankruptcy lawyer. We are a customer service oriented bankruptcy law firm committed to providing personalized attention and dedicated legal counsel. We provide trusted legal counsel and work hard to provide our clients with the fresh start they need and deserve. All of our initial consultations are free and convenient payment plans are available. To speak with a bankruptcy lawyer in Tampa now or schedule a free consultation call us today at 800 990 7763.