Can bankruptcy stop the repossession of vehicles?

When a borrower fails to pay his monthly local payments or is found guilty in any way, the lender can reclaim the vehicle. This situation is known as vehicle repossession.

The repossession laws alter country-wise, but usually, a borrower gives a security claim to the lender. It means the lender has a right to repossess the vehicle without earlier notice if he is found guilty of not paying the loan amount.

The lender can report the repossession to the credit agency that could be detrimental to the borrower’s credit score. However, there are some options to avoid repossession of vehicles, and filing for Dallas bankruptcy lawyers is one of the most common methods.

Texas Repossession Process

Texas Business and Commerce Code governs and controls auto repossession in Texas according to its Section 9.609. It permits repossession by a lender with a security interest in the vehicles. It is almost consistently the case because you use the vehicle as collateral to secure the loan necessary to buy it.

It makes a vehicle, specifically a car, a secured debt. If you do not pay down the debt by making your monthly payments, you have to relinquish the vehicle. According to Texas law, if you pay after the grace period has expired or miss even one car payment, the lender can take the vehicle. Repossession men in Texas do not require a permit to tow your car. Most repossession agents are unlicensed.

A lienholder can take your vehicle with no prior notice to you. But there are particular limits on vehicle repossession. No court order is needed to confiscate personal property by repo men, but they need to seize it without causing a public nuisance or loss of public order.

Weighing Options Regarding Vehicle Repossession

Vehicle loans are generally considered secured debt. If you do not pay your monthly payments on time, the creditor has the legal right to repossess your property. If, however, you pay regularly, you may have several options regarding your vehicle:

• reaffirming the debt to keep the vehicle
• redeeming the debt to keep the vehicle
• retain and pay (not an official option under Bankruptcy Code, but still an option)
• surrendering vehicle to be released of the debt.

Keeping Your Vehicle

If you are currently on your payments and decide you would like to keep your vehicle when you file for Chapter 7 bankruptcy. You may be able to avoid vehicle repossession through redemption (you pay the lender a lump sum to purchase the vehicle) or reaffirmation (you enter into a new contract with the lender and continue making payments).

A third approach is that you continue to pay your vehicle loan. You do not redeem or reaffirm the loan. Although this is not an official option under the bankruptcy code, it is often the best option. In most cases, the lender will not repossess your vehicle as long as you are currently making your payments.

Surrendering Your Vehicle

You can surrender your vehicle during the Bankruptcy Lawyers Dallas Fort Worth process if you do not want to keep it. You will have to point your intentions and preferences to the court and the vehicle lender on a specific form (Statement of Intention).

Keep in mind, though, that while surrendering your vehicle does have specific benefits, like you’ll be free of monthly payments you may not be able to afford. Another benefit, that vehicle is worth far less than your loan balance.

There can be disadvantages to surrendering your vehicle, too. If you surrender your vehicle, it may be hard to obtain a car loan after bankruptcy. You may wind up having to get a loan with a high-interest rate, and you may get forced to use subprime lenders.

Getting Your Vehicle Back After Repossession

Once your vehicle gets towed, you have a few chances to get it back:

• Redeem the vehicle by loan balance payment
• Negotiate with lender to refinance the loan
• Reinstate the loan by paying all previous due costs and bills
• File for Chapter 13 or Chapter 7 bankruptcy

When you pay the late fees, repossession costs, and outstanding balance, then only reinstatement of the original loan terms is achievable. Those are the fees the lender had to pay for hiring repo agents and storing and towing your vehicle.

Redeeming the vehicle requires paying the loan balance in one lump sum within ten days. It is challenging for most people already behind on payments. If you do not pay the balance, the lender can sell the vehicle at a public auction to reclaim the money owed.

Conclusion

In addition to understanding how filing for bankruptcy may affect ownership of a vehicle, a debtor will want to decide whether they can use a cramdown to reduce the amount they owe on an auto loan while managing other debts during the bankruptcy process.

This option is available in a Chapter 13 bankruptcy which can ensure that a person will avoid the potential loss of their vehicle while still making affordable payments.

Filing for bankruptcy can be a daunting process, and you may find yourself fraught with many questions. Visit Thetexasattorney.com, to get tailored legal assistance in dealing with your vehicle repossession concerns