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Irvine Bankruptcy Lawyer / Repossessions

You need your car. You need it to get to work. You need it to get to the grocery store. You need it to get to the beach. If you live in Southern California, there is nowhere you need to go that you do not need your car to get you there. Unfortunately, if you are financing your automobile and facing financial difficulties, missing too many payments puts your car at risk of getting repossessed. It is not just your car that can be subject to repossession either. Any item that you are financing – your big screen TV, your living room set, your washer and dryer – can be taken back by the creditor if you fail to keep up with the payments. You lose the property, and you lose all the equity you built up while you were making payments, no matter how close you were to paying off the debt.

Bankruptcy can be an effective tool for dealing with property at risk of repossession. By eliminating unsecured debt in Chapter 7, you free up income that can go toward paying those secured debts. In Chapter 13, you can cure any default while adjusting the debt and rolling it into your repayment plan. Even if a repossession is underway or has already happened, bankruptcy can still be of help. Learn how below, and contact The Law Office of Charles A. May for advice and assistance from a skilled and knowledgeable lawyer.

What Happens to Your Car When It Gets Repossessed?

If you default on your auto loan payments, the lender has the legal right to repossess your car. In many cases, they can do this without warning and may even come to your home to take the vehicle. After repossession, the car usually goes to auction where it is sold to the highest bidder. The money earned from the sale goes toward your outstanding loan balance.

Having your car repossessed and sold out from under you is not always the end of the story. In many instances, the amount obtained from the car’s sale is insufficient to cover the remaining loan balance and associated fees. The difference between the sale price and the total amount you owe is known as a “deficiency.” The lender can file a deficiency judgment against you, requiring you to pay this outstanding amount. You no longer have the car, but you still have to pay for what you borrowed.

Lenders are required by law to sell the car in a “commercially reasonable manner” and try to at least get fair market value for it. However, even if they sold the car for fair market value, it might still not cover what you owe, leaving you liable for the deficiency.

How Bankruptcy Can Help Fight Repossession

Filing for bankruptcy can provide immediate relief through a provision known as the “automatic stay.” The automatic stay puts a halt to all debt collection activities, including repossessions, the moment you file for bankruptcy. This powerful provision of the law essentially provides you with the time and legal space to reassess your financial situation and make a plan.

Once the automatic stay is in place, not only does it prevent future repossessions, but it can also force the lender to return your car if it has already been repossessed, provided you act quickly.

Bankruptcy Exemptions for Automobiles in California

Many people who file Chapter 7 bankruptcy worry that they might lose their car in the bankruptcy proceeding. It is true that in Chapter 7, the bankruptcy trustee has the power to “liquidate” or sell your non-exempt property to pay off your creditors before eliminating your unsecured debt, such as credit cards and doctor bills. However, California has two different sets of bankruptcy exemptions that allow you to exempt most or all of your property from sale. No matter which set of exemptions you choose in California, you will find protections for your automobile. The motor vehicle exemption under System 1 exempts up to $3,325 of your equity in the car. System 2 offers a $5,850 exemption for your car plus a wildcard exemption that can total up to $31,275 and be used to protect your car or other property. These exemptions can help protect the equity in your vehicle when you file for bankruptcy.

If the value of the car after applying the exemption is not very great, the trustee will not bother to take it. If you still think the car is at risk of being taken because of its value, you may have the option of redeeming it in Chapter 7. If approved, this involves making a one-time payment equal to the car’s current market value, effectively releasing you from any additional loan obligations.

Sometimes, maintaining the car loan and keeping the car is simply not financially feasible or the best idea in your overall circumstances. In such cases, bankruptcy allows you to “surrender” the vehicle, erasing the deficiency debt linked to it.

Your car is important, but it is only one factor among many when filing for bankruptcy. Knowing which set of bankruptcy exemptions to apply, or deciding whether to redeem the vehicle or let it go, are all important issues to consider with the guidance of your trusted bankruptcy attorney who will work to achieve the best solution that meets your needs.

Getting Your Car Back After Repossession

If your car has already been repossessed, filing for bankruptcy immediately can help you get your vehicle back. This is generally easier to accomplish if the car has not yet been sold at auction. California law requires the company that seized your vehicle to notify you within 48 hours about the repossession and your rights to claim your personal effects or pay what you owe before the car gets sold. Now is the time to contact a bankruptcy lawyer and take immediate action.

Additionally, if you had nonexempt equity in the car, then the bankruptcy trustee can force the company to return the car to you as it properly belongs in the bankruptcy estate. Again, this is more difficult if the car has been sold, so time is of the essence.

Contact The Law Office of Charles A. May for Help With Repossessions

Repossession of your car or other personal property can be a serious blow, but there are ways bankruptcy can help. At The Law Office of Charles A. May, we are committed to helping you navigate through the complex maze of California repossession and bankruptcy laws and provide a tailored solution that works for you. If you are facing repossession, know that you have options and rights. In Orange County, Los Angeles, or throughout Southern California, call The Law Office of Charles A. May for a free consultation with a knowledgeable bankruptcy lawyer. Let us help you make the best decision for your circumstances.

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