How can bankruptcy save an automobile from the finance company?
Typically, if a person is about three months behind with their monthly auto finance payments, the finance company will commence the repossession process.
Theoretically, a chapter 7 or chapter 13 filing will stop the repossession of an auto, due to a default. However, only a chapter 13 will allow the debtor to keep the auto and cure the default. Also, if the auto has been repossessed, a chapter 13 filing, will require the finance company to transfer possession of the vehicle back to the debtor, if the auto has not yet been sold. This means that if the auto was transported to another state for auction, prior to the bankruptcy filing, the finance company must transport the auto back to New Jersey, after the filing.
To obtain possession of the auto, the debtor must provide proof of adequate insurance coverage that has a reasonable deductable and covers the finance company, as the loss payee, in the event of damage or loss of the auto. Also, the debtor must have filed a feasible chapter 13 bankruptcy plan with the court, that provides for payment of the financing. Depending on various factors, the debtor has various options regarding the payment of the financing. It may be possible to cure the arrears through the monthly bankruptcy plan, while making the future payments as they come due. The debtor may be able to pay the entire amount that is due on the automobile through the bankruptcy plan. Or, under certain scenarios, the debtor may be able to pay only the value of the vehicle, at a fair interest rate, through the bankruptcy plan. Under all scenarios, the debtor’s bankruptcy schedules must reflect the ability to pay the monthly trustee payments and/or direct payment to the finance company.
There may be various issues that arise when requesting the transfer of a repossessed auto back to the debtor, in addition to the above. After an auto is repossessed, the finance company will incur fees for storage, transportation, etc. The finance company will generally demand payment of all fees and costs prior to the transfer.
You can call NJ consumer bankruptcy lawyer Robert Manchel at (866) 503-5655 to discuss how bankruptcy can save your auto.