My car lender repossessed my car right before I filed for Chapter 13 bankruptcy. Can I get it back?
Maybe. If your car is necessary to your household (for example, you need the car to get to work so that you can make your Chapter 13 payments) and your Chapter 13 plan pays the lender both the back payments and the payments due going forward, you can file a motion for turnover.
A motion for turnover orders the lender to return your car. If you want to get the car back, you must make “adequate protection” payments to the lender, starting after you file bankruptcy and until your plan is confirmed by the court, when you will begin making your regular monthly payments to the trustee. Adequate protection payments compensate the lender for vehicle depreciation (so the lender isn’t losing more money) between the time you file and the time your bankruptcy plan is confirmed and regular payments begin. Sometimes, the lender will return your car to you without requiring you to file a motion for turnover, once it receives your bankruptcy plan showing how the lender will be paid. Talk to a local attorney to find out what happens in your area.
In Chapter 13, you might have an option called the "cramdown" by which you repay the lender the market value of your vehicle instead of what you actually owe on the loan. To learn more about this option, see Car Loan Cramdowns in Bankruptcy.
Should I Try to Get the Car Back?
Getting your car back once it's been repossessed is not the always the best option. Often, people are willing to accept any terms to get a vehicle back because they need the car, for example, to get to work. However, if you owe significantly more than the vehicle is worth and know you will have trouble keeping up with the payments in the future, you might want to contact an attorney and discuss your options.
Can I buy another car after the bankruptcy? If you let the car go, the debt will be discharged in your bankruptcy and you can look into purchasing another vehicle. Often, people believe this is not an option after bankruptcy, but while interest rates might be higher and a lender might want proof of income or a higher down payment, it is possible to purchase a vehicle after bankruptcy. An informed lender knows that you no longer have debts to pay and you are barred from filing another Chapter 7 bankruptcy for eight years. Practically speaking, this makes you less of a credit risk than a shopper who can file bankruptcy at any time after purchasing a car.