Q: If I have defaulted on my car loan payment, can the lender repossess my car once I file a bankruptcy petition?
A: Upon the filing of a bankruptcy petition, an automatic stay is invoked which prohibits: (a) the commencement or continuation of any action or proceeding against the debtor that was or could have been commenced prior to the filing of the petition; and (b) any act to obtain possession of property of the estate or to exercise control over property of the estate. However, the lender may, for cause, seek a court order vacating the automatic stay for the purpose of repossessing the car, selling the car, and applying the sale proceeds to the outstanding sum due. Whether the court will enter an order vacating the stay will depend upon whether the lender can demonstrate the required cause. The court’s determination will depend upon factors such as the estimated equity in the vehicle, the amount in arrears, and your ability to become current. Before filing a petition, this matter should be discussed with one of the expert bankruptcy attorneys on the Kirschenbaum & Kirschenbaum, P.C. team, particularly if your car is a necessity, needs to be protected, and its repossession would interfere with your ability to take care of your family’s needs or your ability to generate an income.