Everybody knows that if you don’t make your car payment, the finance company can repossess your car. I’m often asked by clients if the finance company has the right to repossess other vehicles or things they own. In this blog I’ll lay out exactly what gives a creditor the right to repossess items and how a bankruptcy case stops them from doing so.
What Can Creditors Repossess
First, it’s important to know that a creditor can only repossess something that you’ve given it permission to repossess. This permission is called a “security agreement,” and it’s a document you’d sign at the time of taking out the loan. The security agreement has to specifically identify what property is being pledged as collateral. Only the items identified are subject to repossession. Unless you signed a security agreement, then the creditor does not have the right to repossess anything from you.
The security agreement or the loan document itself will also lay out what constitutes a default on the loan. Usually a default will be failure to make a payment for a certain period of time. Once the default happens, the creditor has the authority to repossess the collateral. They are not required to let you know that they are coming to repossess.
How to Stop a Repossession
A bankruptcy case will stop a repossession. If they are looking to repossess your vehicle, but you file a bankruptcy case before they have gotten it, then the creditor is prohibited by the bankruptcy automatic stay from repossessing it. Sometimes you may be able to work out a deal with the creditor to let you retain your vehicle, but from a legal standpoint only a bankruptcy can prevent them from repossessing.
In a situation where a creditor is looking to repossess your vehicle, a Chapter 13 bankruptcy case is the best way to keep and protect the vehicle. Chapter 13 allows you to pay for your vehicle over time without having to pay a large lump sum up front to the finance company to stop the repossession. At Bond & Botes we specialize in consumer bankruptcy, including Chapter 13 cases. We have convenient offices in Alabama, Tennessee, and Mississippi. If you have fallen behind on a debt that is secured with collateral, don’t wait to contact us. Our experienced attorneys offer free initial consultations to help you take control of your financial situation and protect the assets you care about.
Nick Gajewski is an Associate Attorney at the Bond & Botes Law Offices in Florence and Haleyville, Alabama. He holds a Bachelor of Arts from the University of Alabama, and a Juris Doctorate from the University of Alabama School of Law. Nick joined the team of Bond & Botes bankruptcy lawyers back in 2014 and has been helping clients navigate financial issues since. Read his full bio here.