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If you are facing repossession because you have fallen behind on a car loan, or foreclosure in the case of a mortgage, filing for bankruptcy may offer you relief from the debt and a solution to potentially save your property. Filing Chapter 13 or Chapter 7 bankruptcy in Nevada can put an immediate stop to car repossession and home foreclosure actions.
Automatic Stay Protection
Immediately after filing for bankruptcy, an automatic stay takes effect. This court injunction prevents most forms of collection and creditor action against you, including eviction, repossession, eviction, and wage garnishment. This automatic stay prevents a car lender from even calling you to collect on the debt, let alone repossessing your car. The only way for a lender to repossess your car after filing for bankruptcy is getting permission from the court first, or waiting until your bankruptcy case is dismissed or your debt is discharged and you do not sign a reaffirmation agreement.
Court Permission to Repossess a Car
The automatic stay protects you, but creditors can request permission from the court to lift the order and repossess your car. A lender can do this by filing a motion for relief from the automatic stay and show that they are the correct party with the right to repossess and that the lender’s interests are not sufficiently protected because you are not making on-time payments or have defaulted.
You will typically have 2 weeks to oppose the motion. If you do, a hearing will be scheduled within 30 days from the date the motion was filed and served to you. The judge has the discretion of denying the lender’s motion if the motion was flawed or the lender made an error in applying your payments to your account. Even if the motion is served correctly, the judge can continue with a hearing to give you and your lender an opportunity to come to an agreement. If you are not trying to negotiate with your lender or fix the default, a bankruptcy judge will most likely give the lender permission to repossess.
Despite this, the automatic stay protection does give you more time to catch up on loan payments and reach an agreement with your lender.
Avoiding Repossession During Bankruptcy in Nevada
There are many ways to avoid repossession of your vehicle after filing for bankruptcy. An experienced Las Vegas bankruptcy attorney can walk you through your options.
One option is negotiating with your lender to cure the default and keep your car. Your lender may be willing to work with you on the principal balance, interest rate, or loan term because bankruptcy will completely discharge your obligation to repay the remaining balance, and repossessing and selling the car may not be enough to recoup their losses.
Cure the Default
Lenders only want to repossess vehicles when loans are in default. Lenders usually file for a motion for relief from the stay because the borrower is in default or does not have insurance. If you catch up on payments and cure the default, the majority of lenders will not repossess.
Redeem the Car
Chapter 7 bankruptcy gives you an opportunity to redeem or buy back your vehicle for fair market value. To do this, you will need to file a motion with the court and make a lump sum payment. If your car is worth less than your loan balance, this can be an excellent option to own your vehicle free and clear without paying the remaining balance on the loan.
Contact a Repossession Lawyer in Las Vegas
If you hope to avoid repossession or foreclosure during bankruptcy, it’s a good idea to consult with an experienced bankruptcy attorney as bankruptcy law is very complex. Keeping your property through negotiation, curing the default, or redeeming the property can be done on your own, but even simple mistakes on the paperwork or failing to meet a deadline can have serious consequences.
Contact Vegas BK for a free consultation with a Las Vegas bankruptcy attorney to review your options and learn more about avoiding repossession.