When debtors see no way out of debt in Wetumpka, Alabama, they have the option of Chapter 7 bankruptcy. The debtor may hesitate, wondering what will happen to their possessions, especially their vehicles they need for getting to work. Understanding how Chapter 7 bankruptcy helps to remove doubts about filing.
Basics of Chapter 7 Bankruptcy
Chapter 7 bankruptcy commonly gets referred to as liquidation. The court converts non-exempt assets to cash to pay debts through a trustee. Examples of non-exempt assets are primary homes, necessary furniture and clothing.
A main benefit of bankruptcy is the automatic stay that prohibits creditors from collection attempts. This also means the lenders who give car loans.
Can a Vehicle Still Get Repossessed?
A vehicle may get repossessed if the court gives a lender permission and lifts the automatic stay. The lender has to prove the owner has fallen behind on payments.
A debtor can delay the repossession within two weeks after the lender files the automatic stay release. The debtor likely needs proof the lender never informed them they had fallen behind, or they made payments that weren’t counted.
Redemption
Under Chapter 7, a vehicle owner may be able to get redemption if the loan balance exceeds the car value. This means they pay the lender a lump sum worth the cash vehicle of the value to keep it. The lender has to accept this amount.
However, some restrictions apply. The asset has to be personal, non-real estate property, and tangible meaning it can be touched. If the owner can’t make a lump sum payment, they should consider borrowing from someone or apply to get a special redemption loan some lenders offer.
Bankruptcy offers debtors a fresh start, but it must be done correctly. While a debtor could represent themselves in court, laws are complex. they have a better chance of succeeding with a bankruptcy attorney.