Auto repossession is an unfortunate situation too many Floridians face. If a borrower fails to make timely payments for a car loan, the lender may begin the repossession process. See Florida Statute 537.012. For many Florida residents, cars are essential for getting to and from work, school, or other obligations and repossession can have devastating consequences. Fortunately, there are options a borrower can use to stop car repossession. If you are at risk of having your vehicle repossessed contact us to speak with a bankruptcy attorney in Tampa. We have a lot of experience helping borrowers stop car repossession and get a fresh start.
The Automatic Stay Will Stop Car Repossession in Florida
When you file either Chapter 7 or 13 bankruptcy an “automatic stay” is put into place under bankruptcy law. The automatic stay will instantly stop car repossession as soon as the case is filed with the court. The automatic stay requires all collection activity against you to stop immediately. Creditors and collection agencies will not be able to contact you, garnish your wages, or repossess your property while the automatic stay is in effect. This stay is applicable to all creditors and none of your creditors can repossess any of your property during the time the automatic stay is in place. See bankruptcy law 11 U.S.C. § 362(a).
Chapter 13 Bankruptcy to Stop Car Repossession in Florida
Chapter 13 is a valuable tool borrower can use to stop a car repossession and maintain ownership of the vehicle. In Chapter 13, the borrower can have up to 5 years to pay off the car loan- so in most cases, this provides time for the owner to catch up on the payments by spreading the past-due balance over essentially a new 60-month loan. 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. Therefore, if you owe $30,000 on the car but it is only worth $20,000 the cramdown will reduce your loan to $20,000. To be eligible for this cramdown, you must have purchased the vehicle at least 910 days prior to filing bankruptcy.
Chapter 7 Bankruptcy to Stop Car Repossession in Florida
Traditionally, Chapter 7 is used when a borrower no longer wants the vehicle and is interested in wiping out the remaining loan balance. While that is still an option in Chapter 7, borrowers can also use Chapter 7 to keep the car and prevent car repossession. Under bankruptcy law 11 U.S.C. 722, a borrower may redeem the property, this is typically referred to as a 722 redemption. Under this provision, the borrower would receive 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 $5,000, and the $13,000 difference is discharged and erased in the bankruptcy. If a debt is discharged in Chapter 7, the borrower’s personal liability on the debt will be wiped out. In Chapter 7, there is no 910-day ownership requirement, unlike in the Chapter 13 version.
Consult With a Florida Bankruptcy Attorney in the Tampa Bay Area Today
At Florida Law Advisers, P.A., our Tampa bankruptcy attorneys have years of experience helping people just like you solve their financial problems. We understand these are very difficult times for you and we are here to help. Our professional legal team will be by your side every step of the way to ensure you get the most out of your bankruptcy filing. We will use our knowledge of bankruptcy law and skills in the courtroom to help discharge your debts while taking full advantage of every possible exemption.
Our initial consultation is free and we offer flexible payment options to all of our clients. Florida Law Advisers, P.A., wants to provide you with solutions, not add to your financial burden. We will work with you to develop a payment plan that you can afford. We accept many forms of payment and offer our bankruptcy clients the choice of either a low-cost flat fee or a low-cost hourly fee for representation.
Frequently Asked Questions
Typically, Chapter 7 is used when a borrower no longer wants the vehicle and is interested in wiping out the remaining loan balance. While that is still an option in Chapter 7, borrowers can also use Chapter 7 to keep the car and prevent a car repossession.
Yes, when a Chapter 7 or Chapter 13 case is filed an automatic stay is instantly put into effect. The automatic stay is a federal law which stops all forms of collection activity, including car repossessions already scheduled to occur.
Often, after a repossession auction there will not be enough funds from the sale to pay the loan in full. In cases such as these, the bank may sue the borrower for the remaining balance (deficiency). Additionally, the bank will usually add interest, late penalties, and legal fees onto the balance.
In Chapter 13 bankruptcy, the borrower can have up to 5 years to pay off the car loan. This provides time to catch up on payments by spreading the past-due balance over essentially a new 60-month loan.