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How to Stop Repossession
by Adam Mack, J.D.
Hillary Stirling, research assistant
One of the most common situations that will convince people to come through my doors is the repossession of their vehicles. Other types of property can be subject to repossession, but the vast majority of repossessions involve automobiles, so I'll use them as an example. Just know that, whether it's a threatened repossession of your car or other property, or if it's something that's already back in the hands of the bank, debtors do have options.
How Can They Repossess My Car?
First, a little background. The vast majority of the time, when someone finances the purchase of a car, it's through a bank, credit union or another financial institution. Other times, people who already own their car will take out a title loan against it through another institution like a payday loan or dedicated title-loan company. (For simplicity's sake, I'll just talk about banks below, but the principles I'll discuss usually apply to all these different types of lenders, too.)
The bank will issue the loan but will require that the vehicle be considered collateral. The terms vary, but the general gist of most automobile loans is that the car belongs to you, and you get to keep it as long as you make your payments in full and on time. If you miss payments or if the payments are short, the bank has several options, including everything from imposing no consequence for the missed payment to "repossessing" or taking the car back and reselling it to cover what you still owe. If you've missed just one payment or are late with it, most reputable financial institutions are willing to work with you to get you current again with your loan, but they don't have to and banks often have a financial incentive to not work with you. Never assume that you have any wiggle room with payment due dates and amounts.
When you sign the loan paperwork, you agree to these terms. This type of loan, in which there's something tangible at stake, is called a secured loan
What Are My Options?
If your car has not yet been repossessed, the automatic stay in bankruptcy will stop the bank in its tracks. It's always best to be proactive and not wait until the repo man is loading your vehicle onto his tow truck, but I know of at least one case when a debtor was at her lawyer's office when the repo man caught up with her. She filed bankruptcy on the spot, and when she walked out to the parking lot with her bankruptcy petition, the repo man had to let her keep her car. Bankruptcy is that powerful.
If your car has already been repossessed, the bank is required to give you at least 10 days notice before they can resell or otherwise dispose of the vehicle, and during that time you do have the option to "redeem" the car or get it back. Of course, the terms of the contract will probably require you to make up any late payments, pay various fees, etc., and so redeeming your vehicle will most likely be rather expensive. A qualified Kansas bankruptcy attorney would be experienced in helping you do a cost analysis to figure out if it's worth it to redeem a vehicle.
The Most Important Part
People rely on their vehicles to get them to work and to school, to doctor's visits and to the grocery store. The automobile is in many ways the first step in the American Dream. If your car or other property is being threatened with repossession, contact us! As a debtor, you have rights and options, and we'd be happy to help you explore them.