Vehicle Repossession and Arizona Bankruptcy Regulations
When debt accumulates, a person faces serious consequences and potentially aggressive efforts on behalf of creditors to collect. These efforts could include the repossession of a vehicle. Can a vehicle repossession occur during bankruptcy proceedings, what rights to debtors have and how can they challenge creditors? The following guide will give you the essential details about vehicle repossession and Arizona bankruptcy regulations.
Do Creditors Have the Right to Repossess a Car?
While debtors are entitled to certain protections in the event of a bankruptcy, these protections are of temporary nature. Vehicle repossession is possible in the case of a Chapter 7 bankruptcy and it can also occur in a Chapter 13 filing.
Auto loan providers can file liens against a vehicle in the case of debt. As a result, they become secured creditors and they are entitled to getting a payment before unsecured creditors are provided with such. When the court releases the car of the bankruptcy filer from the automatic stay, a vehicle repossession can occur.
Once the car is repossessed, the auto loan provider is usually going to sell it. The amount will be used to cover outstanding loan balance. If the creditor still owes a certain amount, that sum will have to be repaid in the bankruptcy.
The Automatic Stay and Car Repossession
While the automatic bankruptcy stay is in effect, a creditor cannot undertake actions aimed at automobile repossession.
A lender could file a motion to lift the automatic stay if they believe that the vehicle should be repossessed and that the debtor is not entitled to court protection. Usually, a repossession is allowed during the automatic stay period if the creditor can prove that their interest isn’t being adequately protected.
The lender’s interests aren’t being protected, for example, when you fail making your automobile loan payments. If a motion to lift the automatic stay is filed, you will be given 14 days to object. The burden of proof falls on the creditor and in most typical cases, the automatic stay will not be lifted.
What to do if You Are Facing Automobile Repossession
Car repossession at a time when you’re experiencing financial trouble can add to your stress. If you are facing such action, you should talk to your bankruptcy attorney immediately. Your legal representative can object to the motion and find reasons to maintain the automatic stay.
To avoid a repossession altogether, you will have to focus on a few essentials.
The most important thing is to cure your default as soon as possible. If your loan isn’t in default, there will be no reason for the creditor to pursue the repossession. It may even be possible to discuss a more lenient repayment plan. If you make an effort, chances are that an automobile loan provider will not move forward with such a serious measure against you.
Keep in mind that in Arizona, a bankruptcy exemption does apply to automobile equity. The current exemption is 6,000 dollars of equity in a vehicle or 12,000 dollars if debtor or debtor’s dependent is disabled (see A.R.S. 33-1125). If the car equity does not exceed the exempt amount, you will get to keep the vehicle.
Avoiding the repossession could sometimes also mean selling the car on your own. If you attempt to sell privately, you may get a better deal than the amount that your car loan provider will acquire through the repossession. The sum that you get will go towards covering your loan and if it happens to be larger, you will keep the surplus.
If you need some time to make a decision, you may want to consider a bankruptcy filing. The automatic stay will protect you and give you a chance to either liquidate or reorganize your debt. Talk to an experienced bankruptcy lawyer about the possibilities with respect to vehicle repossession and Arizona bankruptcy regulations.