Thursday, April 25, 2019

I’ve Filed Chapter 7 Bankruptcy: Can My Lender Repossess My Car?

You realize that you are in bad financial “shape,” so you decide to file for Chapter 7 Bankruptcy. So on top of everything can your car loan lender repossess your car or try to collect debt? It depends.

Debtors Protected by Automatic Stay

When you file for Chapter 7 bankruptcy, an order is automatically created, known as an automatic stay. An automatic stay means that it is unlawful for most creditors to continue to collect from you – or even call you. This means that your car loan lender will not be able to collect any debt from you and is unable to repossess your car without first receiving permission from the court.

Lender Requires a Court Order

In order for a lender to receive permission to repossess or collect debt from the debtor, it must request that the court lifts the stay by filing a “motion for relief from the automatic stay.” In the motion, the lender must demonstrate that it has the authority to repossess the vehicle and must show that its interests in repossessing the vehicle are not being properly protected since the debtor is not making payments on time or has defaulted. In response the debtor has approximately two weeks to oppose the motion, which will likely result in s hearing within 30 days.

Procedural Flaws

If you can demonstrate that a mistake has been made (e.g. failed to properly file its motion), the judge may deny the motion. Even if there is no procedural flaw, a judge may still desire that the lender and debtor work to come to an agreement. In situations where a debtor is not trying to fairly negotiate or come to an agreement with the lender, a judge may decide to lift the stay, allowing for the lender to repossess your car.

What Can You Do to Avoid Repossession During Chapter 7 Bankruptcy?

There are a few various options in order to try to avoid repossession of your vehicle.


If you have defaulted on your car loan, your lender will likely want to repossess your car. The most common reasons that the lender will file the motion for relief from the stay are a lack of car insurance or a lack of payments made. If you can simply make the payments that you have failed to do and are able to catch up on what is owed, it is likely that you can remedy the situation and that your lender will not repossess your car. However, it’s likely that you don’t have the necessary payments.


Most car lenders do not want to be in a situation where they must consider repossession. They would rather have you continue making payments. This allows you the opportunity to negotiate with your lender (e.g. a reduction in interest rate). If agreed upon, you remain personally liable for payment and your car can still be repossessed.


A third option is to buy back (redeem) your vehicle for fair market value. This may make the most sense if your car is worth a lot more than the balance on your loan. To own it free and clear, you must file a motion with the court and make one lump sum payment.

Miami Valley Bankruptcy Helps Those Filing for Chapter 7 Bankruptcy

If you or a loved one has filed or needs to file for bankruptcy, the Ohio bankruptcy attorneys at Miami Valley Bankruptcy can help. To learn more or to schedule a free consultation, visit us online or call us at 937-262-4789 today!

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