Can Chapter 13 Protect the Car From Repossession If I Just Bought It?
As a general rule, Chapter 13 bankruptcy protects you from repossession of your car. However, what happens if you just bought the car right before filing bankruptcy? The answer to this question in Northwest Georgia is that it depends on the facts of your case.
For example, let’s say you bought a car six months before filing. The reason you filed is because you lost your job after you bought the car but now have found a new job. After your bankruptcy case is filed, your car creditor files a Motion for Relief from the Automatic Stay so that they can get permission from the Bankruptcy Court to get your car back. I don’t think that under this kind of fact scenario that a bankruptcy judge is going to allow the car creditor to repossess your car as long you have maintained insurance on it and you need the car for a legitimate reason like going back and forth to work. Furthermore, six months is long time.
Another important question to answer when analyzing car situations is what is the percentage of debt that your unsecured creditors will receive in your Chapter 13 plan? For example, if you are paying back all of your debts at 100 cents on the dollar, you are going to be able to keep the car. When you are wiping out all of your unsecured debt in your Chapter 13 plan, your bankruptcy attorney will have to look at your situation carefully to make sure you will be able to keep your car.
In this next example, I want to paint a picture where I think a judge most likely would grant a Motion for Relief so that a car creditor could take the automobile. Let’s assume you have a person who bought a car two months before filing. Also, assume that this person has never made a single payment on the car. Furthermore, assume that nothing in this person’s economic situation has changed since the car was purchased. With these types of facts, I think a bankruptcy judge will most likely consider it to be abusive to the car creditor to prevent them from repossessing the car. If a situation smells bad to an average person, it’s going to smell bad to a bankruptcy judge as well.
Every case is fact specific. There are always exceptions. For example, in some bankruptcy cases, the cause of filing is a creditor who has filed a lawsuit so that they can garnish their wages. A person who is now facing garnishment clearly has suffered a change in circumstances since the purchase of the automobile.
If you have recently purchased a vehicle and you are afraid that it will get repossessed if you file bankruptcy, I strongly encourage you to sit down with an experienced bankruptcy attorney who can review your entire situation.