Filing Chapter 13 Bankruptcy after Repossession

Filing Chapter 13 bankruptcy after a recent repossession is one possible way to regain property, such as a vehicle. Making the decision to file bankruptcy, however, is a serious one that requires careful consideration.

Understanding Chapter 13

Filing Chapter 13 bankruptcy is an option for people who have the means to pay back their creditors some of what is owed. Under this form of bankruptcy, a debtor works with a trustee and creditors to formulate a repayment plan that covers a percentage of the debt owed. A repayment plan generally involves a 60-month payment period during which a court-appointed trustee receives payments from the debtor. These payments are then distributed to creditors in accordance to a court-approved plan.

Chapter 13 and Repossession

Filing Chapter 13 bankruptcy can help debtors accomplish several things in regard to secured debt and repossessions. Once this type of petition is filed, debtors may be able to:

• Stop repossessions before they happen – If repossession is anticipated, but has not yet happened, a Chapter 13 filing may stop it. Debtors are often given the right to work out a repayment plan for secured debts, such as automobiles, through the court system.
• Regain repossessed property – If a lender has repossessed a vehicle prior to a debtor filing chapter 13 bankruptcy, the act itself may be enough to help the debtor regain the property. If the creditor has not yet sold the property, a debtor can regain it by working out an agreement through the court to repay the amount in arrears and keep up with current payments due.
• Postpone foreclosures – if the repossession in question is actually a bank foreclosure on a home, filing Chapter 13 bankruptcy can effectively halt the proceedings.  If the debtor wishes to keep the property and can work out an agreement to keep payments up to date and bring the past-due amount current, the home may be saved.

Disadvantages to Filing Chapter 13 Bankruptcy

Filing Chapter 13 bankruptcy can have serious consequences on a person’s credit.  Inasmuch, this is often seen as a measure of last resort. It is important for debtors to weigh their options and explore other avenues of redress.

Hiring an Attorney

While filing Chapter 13 bankruptcy can effectively halt repossessions and even foreclosure for a time, it is best to seek qualified legal counsel before going down this path. A lawyer can help an individual determine if a Chapter 13 filing is the best option. It may be that a Chapter 7 is the debtor’s smartest route or another option entirely may be available to help the debtor stop repossession.