An active member of the National Association of Consumer Bankruptcy Attorneys, the Massachusetts Bar Association, and the Worcester County Bar Association, attorney Holly H. Hines helps clients throughout the Worcester County area handle all their bankruptcy problems. Here, she tells us how bankruptcy can help you avoid getting your car repossessed.
With the downturn in the economy, many people can no longer afford to make their car payments for one reason or another. When this happens, and someone stops making the payments on their car loan each month, the banks will typically take steps to repossess the vehicle after three months of delinquent payments.
The banks typically do this as a way to collect their collateral, and to try to recoup the money that they have lent to the borrower for the initial purchase of the car or truck. By filing for bankruptcy, however, the debtor is now entitled to an exemption for his vehicle.
What that means, essentially, is that the debtor is now allowed to basically go back to the auto repossession company and request his vehicle back. And all that has to be done to do this is the debtor must get caught up on his automobile payments with the bank. So in most cases, we are able to get our clients their vehicles back and then also have them repay the bank, which is a great thing.
When someone is filing for a Chapter 13 bankruptcy, what happens is that we can sometimes use that payment plan that comes with a Chapter 13 filing to pay back the auto lender so that our clients can get their car back and hold onto it while they are paying back the bank at the same time.
A Chapter 13 bankruptcy is one chapter that is available for folks who don’t meet the median income threshold that is required to file for a Chapter 7 bankruptcy, which is where the client could completely liquidate all of his debts and not be required to pay them back at all.
So if a person does not qualify for a Chapter 7 filing — possibly because he has too much income, or because he shows too much disposable income left in his account at the end of the month — then we would instead file for a Chapter 13 bankruptcy.
What comes along with a Chapter 13 filing is a payment plan arrangement, where we will negotiate a deal where the debtor might pay back 10 cents on the dollar, so to speak, back to his creditors. When we are looking at a bankruptcy filing where we are coming to an agreement with the creditors on a specific payment plan that the person filing is required to pay back, then that would be in a Chapter 13 plan.
We also use Chapter 13 filings for when folks, such as those who have an automobile repossessed, want to pay back their loan and get their vehicle back from the bank. The Chapter 13 gives them the option to pay the bank back over a 36- or 60-month period, thanks to a payment arrangement that we can set up.
It is thanks to this payment arrangement that we are able to hold on to the client’s vehicles and pay back the lender at the same time. And the great thing is that this is an arrangement that the lenders cannot even object to, because the debtor is protected by the bankruptcy code—the Chapter 13.
If someone is considering filing for bankruptcy but is worried about losing his car during the process, I would certainly recommend that he meet with a bankruptcy attorney to go over his options before worrying about what might happen in a worst-case scenario.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
