Chances are you rely on your vehicle to get you where you need to go — and
when you need to go — whether it’s to work, school, the grocery store, or
the soccer field. But if you’re late with your car payments, in San Diego, if
you don’t have adequate auto insurance, your vehicle could be taken away from you.
Bankruptcy and Car Repossessions
Filing bankruptcy invokes the "automatic stay" which is a
federal injunction that stops or restrains any action by a
creditor to enforce or perfect a lien including a lien on a
motor vehicle.
Repossession is a lien enforcement remedy and is "stayed" by the
filing of the bankruptcy.
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Bankruptcy will Discharge Deficiency actions after Repossession
Unlike a deed of trust, a motor vehicle loan allows for the lender
to sue for damages costs and attorneys fee's after vehicle is sold
at a public auction. Motor vehicles generally are sold for far less than
the amount owed at auction, and the left over personal liability after
adding the costs of repossession, the costs of the lawsuit, and the attorneys
fee's can be substantial. If you wait to long to file for
bankruptcy, you can still discharge the deficiency in your
bankruptcy case.
Filing after repossession but before the car is sold at an auction
Chapter 13 can allow you to use federal debt reorganization
powers to regain possession of a repossessed vehicle. By
claiming that the car is necessary for your effective
reorganization, i.e. it is necessary work transportation, you
can force the lender to return the car back to you where it can
be paid of in a "cram down" in your chapter 13 case.
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