Bankruptcy can halt and potentially reverse car repossession via the “automatic stay,” a period during bankruptcy in which all collective action against you is put on hold. If your car has been repossessed prior to bankruptcy, you may be able to reobtain it provided that the arrearage (back payments for the vehicle) is part of your repayment plan and you’re able to keep making monthly payments.
If your car has not been repossessed and you file for bankruptcy, the automatic stay will prevent repossession until your repayment plan is approved by a judge. If your repayment plan includes arrearage for the vehicle and you stay current with its payments, the lender shall not repossess the vehicle during or after your bankruptcy. You may also need to make “adequate protection payments” during bankruptcy, which generally cover the vehicle’s depreciation and are equal to regular car payments.
If you are dealing with a repossession or at risk of repossession, you have options. Speak with an experienced bankruptcy attorney as soon as possible to evaluate your financial situation and determine if bankruptcy is the best option.