Bankruptcy stops repossession efforts. If a repo is looming because you are behind on a car payment then you may have to catch them up for a Chapter 7 to work without an issue. Then, in the case, reaffirm on the vehicle and keep making the payments until it is paid off. “Reaffirmation” is a process of documents between the car loan lender, you, and your attorney to verify budget numbers and let the Court know of your wish to keep the vehicle.
What a Reaffirmation means for you
This process reattaches the liability between the car loan and you. It makes the whole relationship more of as if bankruptcy hadn’t happened, as to that vehicle. The lender gets you back on the hook for the payments going forward and you get the right to the vehicle as long as you make the payments and then the right to receive the Title when the loan is paid off. Not all vehicles with loans require reaffirmation. A vehicle that has been refinanced may not require one because it is a Non-Purchase Money Security Interest (“NPMSI”) and it works in your favor because you get the rights to the car as long as you make the payments etc, but the personal liability remains severed and their only recourse is the collateral.
With a Chapter 13, reaffirmation is not required because it has its own solution. If you are behind, then a Plan can be proposed to keep and pay for the vehicle and catch up the arrears. If it was already repo'd by the sheriff then your attorney can see about getting it back once your Petition is filed and how much it may cost (repo/storage fees) if any. It is tougher if the creditor did the repo, but often still possible. Your best chance is to talk to an attorney very quickly to see what they can do in your State to get the car turned over to you, at what cost, and what that means for your case.
The most important thing you should know
You don't have to be 3 months behind for them to repo your car. Under many contracts if you are a day late then technically you have defaulted and breached the contract. You likely don’t have a 30 day window of safety. Why haven’t they gotten your car yet? Probably they are hoping you are still going to pay, even if late. Then they are busy going after the ones a little later than yours so you are just further down the line, for now. Keep this in mind, your rights begin to disappear quickly once you lose possession. Don’t wait too long and then be at a disadvantage with such a critical item.