Does Emergency Bankruptcy Stop Car Repossession in Pennsylvania?

If you need to file for bankruptcy immediately to trigger the automatic stay, you can file an emergency petition, which requires fewer documents up front. Once the petition is filed, creditors or lenders may not take legal action to collect a debt, including repossession. However, this protection is not foolproof, and you should speak to an attorney right away.

An emergency bankruptcy petition may trigger an automatic stay from the court that should block repossession. It may be possible to protect your car by claiming state or federal vehicle exemptions. You can also redeem the vehicle to avoid repossession. Remember, the automatic stay is not permanent. Lenders can file motions to lift the stay, or they may continue with repossession attempts after the case is over, depending on your situation.

Receive a private, free case evaluation from our Pennsylvania bankruptcy lawyers by calling Young, Marr, Mallis & Associates at (215) 701-6519.

Can You Stop Car Repossession by Filing an Emergency Bankruptcy Petition?

Lenders can legally repossess your car if you have not kept up with the payments. Depending on your financial situation, you may need to file for bankruptcy. While this can be difficult, it may also come with legal protections to help you get back on your feet.

Automatic Stay

In any bankruptcy case, including emergency filing, the bankruptcy court will impose an automatic stay. This is a court order that prevents creditors and lenders from initiating new legal action against petitioners to enforce or collect a debt. Any legal action that may be pending against you, including repossession attempts, must halt immediately.

Vehicle Exemptions

State and federal vehicle exemptions allow bankruptcy petitioners to protect a certain amount of equity in their vehicle. The amount of equity you may exempt may differ based on your state and whether you choose state or federal exemptions.

You may be able to prevent a bankruptcy trustee from seizing your car to liquidate under Chapter 7 if you owe more than the car is worth, and there is almost no equity or negative equity.

Repossession may still happen after your bankruptcy case is over if you are unable to have debt from a car loan discharged or cured through the bankruptcy process.

Redeeming the Vehicle

It may be possible to prevent repossession of your car after your bankruptcy case is over by redeeming it. This may be a good idea if you owe more than the car’s market value.

Suppose you owe $10,000 on your vehicle, but it is only worth $5,000. By redeeming the car, you may pay the lender the $5,000 the car is worth, with the rest being wiped out. By the end of your bankruptcy case, you would own the car outright.

Can Your Car Be Repossessed After Your Pennsylvania Bankruptcy Case is Finished?

Once your bankruptcy case is over, your car might no longer be shielded from repossession. After the automatic stay is lifted at the completion of the case, lenders may resume repossession attempts.

Did You Stop Making Payments?

You may be able to shield your vehicle from repossession while your bankruptcy case is pending, but these protections no longer apply once the case is over. If you still have your vehicle after bankruptcy, but you are still behind on payments, the lender may once again try to repossess the vehicle.

Is Your Payment Plan Still Active?

If you filed for Chapter 13 bankruptcy, you may be on a payment plan to help you catch up with debts. While the payment plan is active, lenders may not try to repossess your car. The key is keeping up with payments under the plan. If you stop making payments or your case is dismissed and the payment plan is no longer active, lenders may move to repossess the car.

Can Your Car Be Repossessed While Your Bankruptcy Case is Pending?

If your bankruptcy case is still working its way through the court system, your vehicle should be protected from repossession. However, there may be ways lenders can get around these legal protections, even if your case is not yet complete.

Lifting the Automatic Stay

The automatic stay protects you from legal action like repossession from creditors and lenders, the automatic stay is not entirely foolproof. Lenders may file motions with the court to lift the automatic stay.

Lenders frequently file motions with the court for relief from automatic stays when collateral is at risk. Car repossessions are common in these kinds of motions. Often, creditors must show that the bankruptcy process does not adequately protect their interests, the debt is non-dischargeable and unlikely to be wiped out by bankruptcy, or there is a lack of equity in the vehicle that would cover the loan during bankruptcy.

Negotiating with the Lender

If the lender makes it clear that they will seek relief from the automatic stay to repossess your car, our Pennsylvania bankruptcy attorneys may try to negotiate with them. For example, they may agree to reduce the size of monthly payments to make it easier for you to resume payments. They might instead accept a lump sum payment, even if it does not cover all the money you owe, in exchange for halting repossession.

What if Your Car is Repossessed Despite the Automatic Stay in your Bankruptcy Case?

If your vehicle is repossessed despite the automatic stay, and the lender does not obtain relief from the automatic stay, talk to your lawyer immediately. We can tell the court and urge it to enforce the automatic stay and get your car back, if possible.

Should You File for Chapter 7 or 13 Bankruptcy to Stop Your Car from Being Repossessed?

Both chapters can help, but in different ways. Both come with an automatic stay. Under Chapter 7, your car may not be repossessed, but it may be seized and liquidated by a bankruptcy trustee. Under Chapter 13, you may retain your car, and it cannot be repossessed so long as you continue making payments under your Chapter 13 payment plan.

What Happens to Your Car if Your Bankruptcy Case is Dismissed?

Having your case dismissed is not good. It means that the court is unable to complete the case, and you may receive no relief from your financial troubles. Once a case is dismissed, the automatic stay is lifted, and the lender could move to repossess the car.

Contact Our Pennsylvania Bankruptcy Lawyers for Help Right Away

Receive a private, free case evaluation from our Philadelphia bankruptcy lawyers by calling Young, Marr, Mallis & Associates at (215) 701-6519.