One of the first decisions people must make when contemplating a personal bankruptcy filing is the type or chapter of bankruptcy that they will pursue. Most individuals choose between Chapter 13 bankruptcy, sometimes called a wage-earner’s plan, and Chapter 7 bankruptcy, also known as a liquidation bankruptcy case.
For those filing for bankruptcy in the hopes of avoiding a vehicle repossession, that goal may influence every step of the bankruptcy process. Which type of bankruptcy offers the best protection for those facing vehicle repossession?
The automatic stay is the top priority
For those concerned about vehicle repossession, the type of bankruptcy they file may be less important than the timing of the filing. Preventing the repossession of a financed vehicle generally requires a bankruptcy filing that begins before the lender successfully repossesses the vehicle.
While it is possible to work to regain a repossessed vehicle during bankruptcy, the timely implementation of an automatic stay halting collection efforts can prevent the repossession entirely. Both Chapter 7 and Chapter 13 bankruptcy filings provide same-day protection in the form of an automatic stay when people file.
For those with valuable resources, including substantial vehicle equity, Chapter 13 bankruptcy may allow for the retention of more property without a liquidation requirement. Additionally, the process of negotiating a repayment plan could help Chapter 13 filers consistently make their payments on time in the future. Chapter 7 bankruptcy is a faster process that may make it easier for filers to discharge eligible debts and afford their remaining secured debts.
Discussing different bankruptcy options with an attorney can be beneficial for those facing vehicle repossession. Both Chapter 7 and Chapter 13 bankruptcy can prevent repossession and help filers protect their resources when they’re facing financial hardship.
