Dealing with Medical Collections and Car Reposession: Should I Turn to Bankruptcy?

If you are dealing with medical collections and car repossession, do not lose hope because there is a legal way to get the creditors stop harassing you and to get your items back into your possession.  Whether you have appliances, jewelry or a car that has met up face –to-face with the repo man, you can get just about everything that was taken returned, and you can also get those trying to collect medical bills to stop their collection efforts. That solution is turning to bankruptcy. However, you'll have to decide if turning to bankruptcy is right for you.

Understanding Bankruptcy, Repossession and Creditors

If you are in the midst of filing a Chapter 7 or Chapter 13 bankruptcy there is a provision in the bankruptcy law that enables a stay to be implemented by the judge who is reviewing you case.  That stay will eradicate any court orders, wage garnishments or levies that may be in place by your creditors. The stay also requires all creditors- including those collecting medical bills- to stop. Therefore, if you are facing medical bills and car repossession and you can't pay, filing bankruptcy may be right for you so this stay can be put into place.

While, completing all of the documentation for your proposed bankruptcy can seem to be a bit challenging, it is what you will need to do in order for the judge to stop your creditors in their tracks as well as to force these same creditors to return any repossessed property to you.  For example, the one item that has to be returned if it was repossessed, regardless of which bankruptcy you file, is a car. However, there are other differences between the type of bankruptcies that you should be aware of:

• While a Chapter 7 bankruptcy eradicates all debt, you can make arrangements with the courts to keep certain items that you need, and a car is one of them. 
• With a Chapter 13 bankruptcy, you will be required to put a plan in place that stipulates how you intend on paying back your creditors. 
• As soon as you file the paperwork with the court, technically speaking, your bankruptcy is considered to be official.  Once a judge reviews your documentation, then the stay can be put in place.  If you have a lawyer, he or she would better be able to help you through the process.

Let’s say that you had begun your bankruptcy for a Chapter 13 bankruptcy, and in the midst of it all, the creditor that governs the defaulted car loan sends out the repo man to seize the vehicle.  Let’s go even further by saying that the repo man has picked up the car and dropped it off at the auction lot.  Within a few days you receive a letter from the car creditor letting you know that you have 10 days to pay or the car will be sold at an auction.  On that same day, you submit all of your documentation for your Chapter 13 bankruptcy.  As soon as the judge reviews it (which will probably be in that 10 day window) a stay is issued and all of your creditors must abide by it.  This means that your car creditor must return your car. 

Get Legal Advice First

It is important if you are going through a bankruptcy that you consult with an attorney about your options. Your attorney can assist you in stopping collections on your medical bills and in getting back a repossessed car. He can also help you to decide if bankruptcy is the right option for you.