Can A Dealer Sell Your Repossessed Car While In Bankruptcy?

When you file bankruptcy, the hope is that you’ll be able to resolve or dispel your current debts and make a fresh start of things financially. That’s why the courts allow you to keep certain assets that are essential to your livelihood, and that often includes vehicles that you need to work or provide for your household. But what happens if your car is repossessed during a bankruptcy proceeding? It pays to know when the dealer is compelled to return it to you and when he or she is entitled to sell it to recoup losses.

Filing before Your Car is Repossessed

If you file bankruptcy before your car is repossessed, chances are good that the dealer will have to return it to you. Bear in mind that if the order to repossess came down before you filed, the car might still physically be repossessed and if so, it’s vital that you not interfere with this process. Simply notify your lawyer and they’ll speak with the dealer on your behalf, and the car should be returned to you.

Filing after Your Car is Repossessed

Many people think that filing bankruptcy after their car is repossessed means that they’re out of luck. In some cases, they may be right. The dealer who repossesses a car before you file bankruptcy has the right to put that car up at auction in order to help pay off your remaining balance. You, as the debtor, however, have the option to file a motion that the car be returned to you. Once you file such a motion, the courts will look into the matter, and very often, you’ll get the car back. The reason why is that the courts protect against something called “preference” wherein one of your creditors receives preferential payoff over the others. If a dealer repossessed your car just a short time before you filed bankruptcy, there’s a good argument for that counting as their having “preference”, and a court can frequently order a car to be returned for just that reason.

Always Hire a Professional

In the end, however, the best way to ensure that you keep your car throughout a bankruptcy is to enlist the aid of a qualified attorney. Only an attorney can advise you as to what steps to take in your particular situation to get the best results, so don’t overlook their importance. Representing yourself legally typically leads to disappointment.

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