Chapter 7 Bankruptcy: Your Lifeline Against Car Repossession

Sometimes life hits us with unexpected challenges. During these times, managing financial difficulties can be particularly tough. If you’re falling behind on your car loan payments and worried about losing your vehicle, there might be a solution you haven’t considered: Chapter 7 bankruptcy and car repossession.

Bankruptcy may sound serious, but it’s a legal process that can help people get a clean financial slate. In this article, we’ll specifically explore Chapter 7 bankruptcy and how it can help you avoid losing your car in Oregon.

Quick Summary:

• Chapter 7 bankruptcy is a legal process that helps individuals struggling with debt get a fresh start by wiping out most of their debts.
• Car repossession occurs when individuals fail to keep up with their car payments, often due to financial hardship or other circumstances.
• Chapter 7 bankruptcy offers a “time-out” from repossession with the automatic stay and provides options like reaffirmation or redemption to potentially keep your car.

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy helps people overwhelmed by debt start fresh. It erases most debts, giving you a clean slate financially. To qualify, you must disclose all debts, income, and assets, which are then reviewed by a trustee. Certain assets, like your home and car, are protected. Once debts are settled or wiped out, you can rebuild your finances without the burden of debt.

Why Do Cars Get Repossessed in the US?

Car repossession happens when you can’t keep up with your car payments, and the lender takes your car back. Here are some common reasons why it happens:

Missed Payments

The main reason for car repossession is missing payments on your car loan. If you don’t pay what you owe on time, the lender can repossess your car.

Financial Problems

Sometimes, unexpected things happen that make it hard to pay for your car. Maybe you lost your job or had an unexpected medical bill. If you can’t afford your car anymore, the lender might take it back.

Breaking the Rules

When you take out a loan to buy a car, you agree to certain rules, like making payments on time. If you break these rules, like by not paying or not keeping insurance on the car, the lender can repossess it.

Change in Circumstances

Sometimes, your life circumstances change, and you can’t afford your car anymore. Maybe you had a baby and needed a bigger car, or you moved to a place where you don’t need a car. If you can’t make payments, the lender can get the car back.

How Chapter 7 Bankruptcy Can Stop Car Repossession?

If you’re worried about losing your car because you can’t keep up with payments, Chapter 7 bankruptcy might be able to help. Here’s how:

The Power of Automatic Stay

When you file for Chapter 7 bankruptcy, something called an “automatic stay” goes into effect. This is like a time-out that stops creditors, including car lenders, from taking your car while your bankruptcy case is ongoing. It’s like putting a shield around your things to keep them safe while you figure out your finances. As long as you remain in Chapter 7 bankruptcy, your car lender can’t repossess your car without first getting permission from the bankruptcy court.

The automatic stay offers valuable breathing room in several ways:

• Reduced Stress: No more harassing phone calls or threatening letters. You can focus on getting your finances back on track.
• Time to Develop a Plan: The automatic stay gives you time to work with a bankruptcy attorney to create a debt repayment plan or explore other options.
• Protection of Assets: The automatic stay can help prevent you from losing your car or home while you work on your finances.

Automatic stay is a powerful tool in bankruptcy that can give you some relief during a challenging time. However, it isn’t a permanent solution. If you’re unable to make payments or work out a plan to keep your car, the lender could still repossess it after your bankruptcy case is over.

Reaffirmation

In Chapter 7 bankruptcy, you have the option to “reaffirm” your car loan. Reaffirmation is a formal agreement between you and the lender. This means you agree to keep making payments on your car even after bankruptcy is over. As long as you stick to the new payment plan, the lender can’t take your car.

Redemption

Redemption is like buying your car back for its current value. If you owe more on your car loan than the car is worth, redemption can be a way to lower what you owe and keep your car. But you’ll need to come up with a lump sum payment for the car’s current value.

Wiping Out Other Debts

Chapter 7 bankruptcy wipes out many other debts, like credit card bills and medical expenses. This might free up some money in your budget to help you catch up on car payments and avoid repossession.

However, it’s important to know that Chapter 7 bankruptcy might not always stop car repossession for good. If you’re way behind on car payments and can’t catch up, the lender could still take your car eventually.

How Our Portland Bankruptcy Lawyer Can Help You Use Chapter 7 to Stop Repossession

Facing car repossession and financial stress can be overwhelming. But you don’t have to go through this alone. Our Portland bankruptcy lawyers at Michael D. O’Brien & Associates, P.C. can help you understand how Chapter 7 bankruptcy works and whether it’s the right choice for your situation. Our bankruptcy law firm can help you know your rights, explore your options for keeping your car, and guide you through the Chapter 7 process. 

Don’t wait until it’s too late. Take action today to secure your assets and pave the way for a fresh start. Contact us now for a free consultation and let us help you stop car repossession with Chapter 7 bankruptcy. Together, we can explore your options and help you find a way to keep your car and get back on track financially. Your peace of mind is just a call away. 

We can also help you stop foreclosure, stop wage garnishment, and explore bankruptcy alternatives to help you get relief in Bend, Clackamas, Portland, and surrounding communities in Oregon.