Reclaim Your Financial Future Schedule a Free Phone Consultation

Facing Repossession?

The Williams Law Office LLC Aug. 15, 2022

Repossession of your car can be a real financial emergency. Do you have another way to get to work? If not, you could lose your job, which means no salary, which means you can’t pay all your other bills.  There are even people living out on the street or in shelters because of not having another way to get to work after a repossession, then losing their job as a result, then losing the roof over their heads because of inability to pay their bills.

When you signed for your car loan, most likely included in the paperwork was a provision authorizing the lender to repossess the vehicle if you become overdue in your payments. Some loan papers say you must become 30 days overdue or more before repossession; some say they can repossess as soon as you’re one day late. It all depends on what you signed. The lender does not need to file anything with any court, and does not need any judge’s permission here in Georgia.

Your lender may threaten you with repossession if you do not bring your account current, giving you fair warning, or they may just decide to repossess without any warning. Generally speaking, the major lenders (Ford, Toyota, GMAC, etc.) will try to work with you first, and “Buy Here – Pay Here” places are more likely to repo quickly without warning. When a lender actually does decide to repossess, they hire a repo company, or appoint an agent to do the repossession for them. They are not required to give you any prior notice they are coming to get your car; they may try to find the car at your home, at your work, or anywhere else they can locate it. 

To make matters worse, many car loan contracts contain an “acceleration clause.” This means that if you are late in a payment and your car is repossessed, they can demand that you pay the entire loan off very quickly – perhaps in a week or ten days – or you forever lose all right to get your car back.

If they repossess your car and you do not quickly make arrangements which satisfy the lender, they normally will sell your car at an auto auction. Usually this is a wholesale auction, where they get a much lower price than you paid, or than you would get if you were able to sell it yourself.  Next, the lender can also sue you in court for the difference between what you owed and what they got at auction for the car (the “deficiency balance”), plus repossession cost and legal fees (which often total $600 to $1200 together.)  After this is done, they can then garnish your pay check or bank account until they have collected the entire amount.

If Your Lender Has Not yet Repossessed Your Car, but Is Threatening To:

If you are behind in your payments and they have not yet succeeded in repossessing your car, but are threatening to or attempting to, hopefully you can prevent repossession by paying them all the past due amount right away. If you cannot afford to do this, you can prevent repossession immediately by filing bankruptcy and notifying the lender. You then have several choices.

First, if you want to get out of the contract and give up the car, all future money owing to the lender because of the loan can be done away with completely, including the lender’s right to later sue you for any deficiency judgment. 

Second, if you have filed Chapter 7 bankruptcy, and if you can catch up the overdue payments right away and make future payments on time by getting rid of other debt in the bankruptcy, you may be able to “Reaffirm” the debt with the lender, and keep the car. 

Third, if you have filed Chapter 13 bankruptcy, then even if you are several months behind in your payments, you can catch up the late payments by adding them on to your regular payments and pay off the entire car loan under your Chapter 13 plan.

Better yet, sometimes in Chapter 13 bankruptcy your attorney can force the lender to reduce the balance due on the car to the actual present market value and/or force the lender to accept a lower interest rate. This is possible only if you have been making payments for at least 2 ½ years (910 days) before filing bankruptcy.

If Your Car Has Already Been Repossessed:

If you act quickly, sometimes you can get a car back which has already been repossessed by filing bankruptcy. The lender normally does not send your car to auction for ten days or so after repossession.  If it has not already been sold, your bankruptcy attorney can inform the lender of the bankruptcy filing, which creates an “automatic stay,” meaning the lender is forbidden by law to send the car to auction without getting court permission..  

If it is a Chapter 7 bankruptcy filing, most lenders will cooperate in getting your car released to you when your attorney informs them of the filing, if (and only if) you are able to pay them all overdue payments right away, and any repo expenses they had to bear before you filed bankruptcy.

However, if it is a Chapter 13 bankruptcy filing, most lenders will cooperate in getting your car released to you when your attorney informs them of the filing, but instead of having to catch up all overdue payments at once, you pay the car loan as part of your Chapter 13 Plan, including the regular car payments, all past due payments, and any repo expenses they had to bear before you filed bankruptcy.

If the lender is not cooperative in returning your car without further protest after you file Chapter 13 bankruptcy, your attorney may have to file a “Complaint for Turnover” with the Court against the lender, to show he/she is willing to fight for it. Usually, after receiving the Complaint for Turnover the lender will return the car, but sometimes they will not do so without a brief court battle, which means you will have to pay your attorney extra to make a special appearance in court for you to have the judge order your car be returned.

Remember, these solutions for an already-repossessed vehicle only work if you file bankruptcy within ten days or so after your car has been repossessed. Since it takes an attorney a good while to collect all your data and prepare your case for filing, you really need to hire a good bankruptcy lawyer immediately after having your vehicle repossessed, if you want to have a good chance of getting your car back.

Deal with Your Financial Emergency

If repossession is being threatened, or especially if it has already occurred, you may have a very serious situation on your hands, particularly if you don’t have an alternate way of getting to work. If you can’t make your car payments on time, don’t risk losing your job because you can’t get to work. Perhaps it’s time you considered bankruptcy seriously. We’re here to help you. If you’re in Atlanta or the northern Georgia area, call for a no-obligation free consultation.