Things You Should Know About Bankruptcy Repossession Laws

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Did you know that some of your creditors have the right to repossess any items that you have an outstanding balance on.  If the loan that the creditors set up for you was secured- such as a car loan- that means that at the time of signing the contract, you made an agreement to pledge that very item that you are paying on as collateral for the unsecured loan.  That is why the item can be repossessed. However, bankruptcy laws provide some interesting protections regarding the repossession of items.

What Items Can Be Repossessed?

Usually when people hear the term repossessed, they may equate it with a car not realizing that any item (whether it is a car or an appliance) can be repossessed if you acquired it through a secured loan that you are still paying upon.

Creditors can easily act on repossession laws in order to claim their property.  They can file what is called a Complaint for Personal Property Foreclosure while simultaneously getting a court order that will mandate that you return any and all property that belongs to them.

Bankruptcy and Repossession

Filing bankruptcy, whether a chapter 7 or a chapter 13, can have its perks.  Whether you know it or not, once you file your bankruptcy documents a stay is put in place that mandates that your creditors stop calling you and stop any repossession proceedings.  So, let’s say for example, that a lender sent a repo man to take your car:

  • As soon as this happened, you ran to a bankruptcy attorney and filed bankruptcy. 
  • As soon as the judge received your paperwork, he or she ordered that the car company return your car to you. 
  • That means that the repo man has to bring the car back to you.  The only reason why  a judge would not order your car to be returned back to you is if you did not have car insurance on the car.

Of course, since the asset is secured, the creditor will eventually be able to take your item if you don't become current on it. You can't simply keep the item and stop paying- during the course of your bankruptcy, either a payment plan will be reached under Chapter 13, or the item can be taken and used to satisfy debts under Chapter 7.

Getting Help

If you are in the midst of a repossession crisis, you should consider consulting with a bankruptcy attorney.  He or she will be able to put the laws surrounding repossession into better perspective for you.  Additionally, a bankruptcy attorney will be able to hammer out a good strategy for your proposed bankruptcy.  Furthermore, the skill and background of the bankruptcy attorney will assist you in making the most out of which ever bankruptcy you choose.

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