Can a chapter 7 bankruptcy stop car repossession? The short answer is no! A Chapter 7 bankruptcy can delay car repossession, but Chapter 7 bankruptcy does not stop it.
One of the fundamental rules of bankruptcy is that secured debts are either paid or the secured creditor may seek to enforce its' lien on property, and ultimately obtain ownership of the property. In other words, when you get a car loan, you put the car up as collateral for the loan. If you do not make your car payments, then the lender may seek to repossess the car. Bankruptcy does not change the process. Rather, bankruptcy confirms the process. You pay, you keep the car. You don't pay, you lose the car.
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Bankruptcy can delay repossession of a car. Whenever anyone files a bankruptcy action, there is an "automatic stay" (stopping) of most civil actions such as car repossession. This means that a car lender cannot proceed with a car repossession. Instead, a car lender must wait and, at the appropriate time, file a motion asking the bankruptcy court to allow it (the car lender) to proceed with the car repossession. In most cases, unless there is a good reason not to, the bankruptcy court will allow the lender to proceed with the car repossession. However, the car repossession will have been been delayed while waiting for the court's approval for the lender to proceed.
While a Chapter 7 bankruptcy does not stop a car repossession, it can help you keep your car in another way. The primary advantage of a Chapter 7 bankruptcy is that it can discharge unsecured debts (such as credit cards, medical bills, personal loans) meaning that you do not have to pay the unsecured debts. By not having to pay the unsecured debts, you may have more money with which to pay your car payments and, thereby, keep your car.
You should know that it is probably not worth filing bankruptcy if your only debt is your car debt. The costs, including the filing fee, and disadvantages (negative information on your credit report) will probably exceed to benefits of keeping your car.
This is general information. If you need specific information or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.
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