If you have missed a number of payments on your vehicle and you have reason to believe that your vehicle could be repossessed, understand that you have options. Your best option may be filing for bankruptcy.
Once you file bankruptcy, your lender must stop any efforts to repossess your car under the automatic stay. However, because your vehicle is a secured loan, your lender can ask the bankruptcy trustee to restart attempts to repossess your vehicle. Therefore, bankruptcy relief under the automatic stay is only a temporary solution. Bankruptcy does give you time to consider your options and determine what you would like to do with your vehicle.
If you file Chapter 7 bankruptcy and want to keep your vehicle, you can reaffirm your debt or redeem your vehicle. If you reaffirm your debt, you will agree to continue making payments on your vehicle after your bankruptcy. Redeeming your vehicle involves refinancing your vehicle payments based on the fair market value of your vehicle. For instance, if you owe $10,000 on your car, but your car is now worth only $7,500, we can refinance your car loan based on the value of the car.
Under Chapter 13 bankruptcy, you cannot redeem your car loan. However, if you have owned your car for 910 days (just under two and a half years), you can repay your creditors for the current fair market value of the vehicle, rather than the amount of the note. This can save car owners many thousands of dollars. In all auto loans, the Bankruptcy Court will order that a fair rate of interest be charged, which may be lower than what you are currently paying.