Q: I was a little behind on my car payments, and my car was repossessed. Can filing a bankruptcy help me get it back?
A: Yes. Chapter 13’s are often used to cure defaults on car notes. Having the car repossessed does not in and of itself make you lose all of your rights in the car. So long as you have any remaining rights, you can usually use a Chapter 13 to force the lender to give it back and let you pay for it through your Chapter 13 plan.
Q: I received a letter from the car lender saying that I have ten days after repossession to “redeem” the car by paying for it in full. I don’t have that kind of money. Does that mean that the car will be lost after 10 days if I don’t pay for it in full?
A: No. By statute in Georgia, the car lender has to give you ten days to “redeem” the car by paying for it in full. After 10 days, they can sell it, and if it is sold in an “arm’s length” transaction, that will cut off your rights so that you can’t get it back. What’s more, they can sue you to collect any “deficiency” if the car sells for less than what you owed on it.
However, the car will remain your property even after 10 days has run so long as it hasn’t been sold. In other words, so long as the car has not been sold, you can stop the lender from selling it by filing a Chapter 13, and then you can force the return of the car to you as property that is necessary for the successful completion of your plan.
Q: Are there any circumstances where I can’t get the car back?
A: Yes. After a car is legitimately sold before you file bankruptcy, you can’t get it back. Second, you can’t force the lender to give it back unless you can prove to him that you have valid full coverage insurance on it. Thirdly, to benefit from Chapter 13, you need to be able to file a good, workable plan. If you can’t file a passable plan for one reason or another, the lawyer should not file the case because it won’t work in the long run either for you or for anybody else.
Q: How long does it take to get a car back after I file Chapter 13?
A: In most cases, you can get the car back in a matter of hours or in a day or so. You’ll need to prove full coverage insurance, and of course, we would have to successfully reach a decision maker. This is not usually a problem for major car lenders, and is only occasionally a problem with smaller lenders. Of course, if you have a terrible relationship with your lender, that will make cooperation more difficult, but not necessarily impossible.
Q: Are there any other advantages to filing Chapter 13 after a repossession?
A: Yes. It is often cheaper to pay for a car through Chapter 13 than under the contract. In Chapter 13, the interest rate can be reduced to a rate that is around two or three percent over prime, which may be much less than what you are paying under the contract. Further, you can stretch the payments out and take up to five years to pay. In a given case, this can substantially reduce what you are paying monthly.
Q: What is the effect of filing a Chapter 7 on a repossession?
A: A Chapter 7 is generally of no use to you if your objective is to get the car back. Secured lenders have real power in Chapter 7 if you are in default. They are not obligated to work with you to cure missed payments. Instead, that is what Chapter 13 is used for. However, a Chapter 7 will wipe out any “deficiency” owed, so at least you can get a fresh start and then hopefully replace it with another vehicle that you can afford.
If you are not behind in your car payments, it is common to file
Chapter 7 and keep and continue to pay for the car (that is, to “reaffirm” it). It is not true that you must lose your car if you file Chapter 7.
Call attorney’s H. Brooks Cotten or Gina Karrh at 770-683-3303 to discuss your particular situation, and they can discuss your options with you.