Repossessions and Bankruptcy

When people start to fall behind on their payments for things like cars, motorcycles, boats, and other property items, they may be in danger of having these items repossessed. When creditors repossess property, getting it back becomes near impossible. If a person is in over their head with looming debt and can find no way to avoid repossession, one of the things to do is file for bankruptcy.

When filing for bankruptcy, the court issues an Order of Relief. This order has a clause called the “automatic stay.” The automatic stay prohibits creditors from coming after a debtor and taking collection actions while the debtor is filing for bankruptcy. This includes repossession. The automatic stay allows an individual time to catch up on payments and make arrangements to have back-payments paid. But keep in mind that automatic stays do not last forever and lenders will try to find a way around them to get debtors to pay or continue with the process of repossession.

However, keep in mind that bankruptcy should be the absolute last line of defense when it comes to repossession. First, debtors should try to work with creditors to modify loans and make payment arrangements. If the debtor has numerous loans, including on a car, for example, an option would be to work with a debt consolidation company. They will consolidate all the debt, including a car loan, into one, more manageable payment. This will allow individuals to pay current car payments while also making up for the balance on past due payments. This allows people to avoid bankruptcy, repossession, as well as a big black mark on their credit report.