Can Your Car Get Repossessed During Chapter 13 Bankruptcy?

Filing for Chapter 13 bankruptcy is stressful enough without having to worry about your vehicle getting repossessed. Fortunately, Chapter 13 protects you from collection efforts in most cases, with a prohibition called automatic stay.

No repossession at the time of filing

If a lender has not yet repossessed your vehicle before you file for bankruptcy protection, the automatic stay immediately kicks in and prohibits continuing collection efforts, even if you are behind on your car payments. This lasts until a bankruptcy judge accepts the repayment plan. For your repayment plan to be approved, your car expenses must be reasonable and it cannot have excess equity.

However, during that time, you must make adequate protection payments — which typically equal the amount of your car payment — to cover the vehicle’s depreciation. Once your repayment plan is approved, as long as it allows for the back payments on your car loan and you stay current on those payments, the lender is typically not allowed to repossess.

Getting your repossessed car back

In some cases, even if your car has already been repossessed, you may be able to get it returned. If it is repossessed just before you file for bankruptcy, it may be possible to arrange for your repayment plan to cover the back payments and continue making your regular payments on time. If the situation is satisfactory to the bankruptcy judge, your automobile may be returned to you.

Because your car can only be returned to you if you file for bankruptcy immediately after it gets repossessed, it’s important to start the filing process as soon as possible to increase the likelihood of getting it back. And if your car hasn’t been repossessed but is in danger of being so, filing a bankruptcy petition is one of the only ways of retaining it. Contact a skilled Jacksonville bankruptcy attorney at Combs Greene to learn more.

Florida bankruptcy attorney Shane Herbert also contributed to this blog post.