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Can Bankruptcy Halt the Repossession of Your Car?

Bankruptcy is a legal process often seen as a last resort for individuals or businesses struggling with unmanageable debt. One of the primary concerns for individuals considering bankruptcy is the potential loss of valuable assets, such as their car.

This concern is valid as a vehicle is not just a symbol of independence and mobility but also a crucial tool for daily activities like commuting to work or running errands.

So, can bankruptcy halt the repossession of your car? The answer is dependent on several factors, including the type of bankruptcy filed.

Chapter 7 Bankruptcy and Car Repossession

There are two primary types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves the sale of the debtor’s non-exempt assets to repay creditors.

Upon filing a Chapter 7 bankruptcy, an ‘automatic stay’ is implemented which immediately stops most creditors from pursuing collection activities, including car repossession.

However, this stay is temporary, and your lender can ask the court to lift the stay and proceed with repossession if you can’t make payments.

Moreover, in Chapter 7 bankruptcy, unless your car is exempt, it could be sold to repay creditors. Each state has different laws about what assets are considered exempt, so it’s crucial to understand your state’s exemption laws.

If your vehicle’s equity is more than the exemption limit, a trustee may sell the car to pay off your debts. However, if you have a car loan and are up-to-date with payments, you can reaffirm the debt, which involves legally agreeing to continue paying the loan despite bankruptcy.

Chapter 13 Bankruptcy and Car Repossession

Chapter 13 bankruptcy, also known as reorganization bankruptcy, involves a repayment plan where you pay back a portion of your debts over three to five years. Much like Chapter 7, an automatic stay comes into effect upon filing, which can stop the repossession process.

Chapter 13 offers a more significant advantage for car owners as it allows for the “cramdown” provision. This provision lets you reduce your car loan to the current market value of the vehicle if you purchased it more than 910 days (about 2.5 years) before filing for bankruptcy.

This can significantly lower your monthly car payments and make it more affordable to keep your car.

Furthermore, if you’re behind on your car payments, you can spread out the overdue amount over your repayment plan’s length, making it more manageable to catch up and keep your vehicle.


In conclusion, yes, bankruptcy can temporarily halt the repossession of your car. Both Chapter 7 and Chapter 13 offer tools to help you keep your vehicle, depending on your situation.

However, it’s important to remember that bankruptcy is a significant financial decision with long-term consequences. It’s not a decision to take lightly, and it certainly isn’t a one-size-fits-all solution.

Every situation is unique, and what works for one person may not work for another. If you’re facing potential car repossession and considering bankruptcy, it would be wise to consult with a bankruptcy attorney or financial advisor who can help you understand your options, the local laws, and the consequences of each choice.

Bankruptcy can provide a fresh start for individuals overwhelmed by debt, but it’s essential to thoroughly understand the process and its impact on your life and assets like your car.

By taking the time to learn and seek professional advice, you can make informed decisions that best protect your interests and financial future.


stopping car reposession with bankruptcy


Hiring an Experienced Bankruptcy Lawyer

It’s important to hire an experienced bankruptcy attorney as one of the steps to take when you’re facing bankruptcy and you need solid guidance and representation.

This is because there are many different types of bankruptcy. Only an experienced lawyer will know which one would work best for your specific situation.

It might seem like it makes sense to do this yourself. But most people don’t have the time or patience to understand all of the intricate details involved in bankruptcy.

That means they make mistakes by not choosing the right type, or by not filling out paperwork correctly. Both things could lead to delays and ultimately hurt your chances of getting any debt relief at all.

This is not a journey to take lightly, but it is also not one to take alone. If you need to file for bankruptcy, reach out to us today to start your journey with us.

If you want to learn more about the options you have and the steps to take, call us for a free consultation.


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