Auto Repossession Before Bankruptcy

The other day I received a call where an individual asked me whether filing bankruptcy would allow for a car that has been repossessed to be returned. Although my response probably failed to satisfy the caller (the usual attorney response of it depends), here is what is required in California (at least how the courts have viewed the law).

Background

In most vehicle contracts the lender retains a right to repossess a vehicle if the borrower fails to make the scheduled payments. With many contracts, this repossession can be done outside of any court proceedings.

However, once an individual files for bankruptcy many of the rules change. For one, an automatic stay is implemented. This stay prevents most actions against the debtor (individual that files for bankruptcy). Specifically, the automatic stay strictly prohibits any lawsuit or repossession against a debtor that is delinquent on car loan payments. Any repossession after a bankruptcy petition is filed constitutes a violation of the automatic stay, with the repossession void and of no effect. In that case, the lender would be immediately required to return the vehicle to the debtor.

Effect of Bankruptcy on Prepetition Repossession

Section 542 of the Bankruptcy Code requires that entities in possession of “property of the bankruptcy estate” are generally required to turn the property over to either the trustee (in Chapter 7) or the debtor (in Chapter 13). This big sticking point then for this turnover requirement is determining what is “property of the estate.”

Section 541 of the Bankruptcy Code defines property of the estate. This definition includes “all legal or equitable interests of the debtor in possession as of the commencement of the case.” Basically this definition states that whatever rights the debtor has at the commencement of the case continue in bankruptcy. As for the vehicle that has been repossessed, the court has to discover what rights a debtor had when the bankruptcy case was filed.

These rights are determine by state law (California State law). Under the California Civil Code (section 2983.2), a debtor has the right to redeem a repossessed vehicle up until the date the car is sold by the repossessing lender.

Two recent cases have come to different conclusions as to whether turnover of the vehicle is required upon the filing of the bankruptcy petition. First, in a case from the Southern District of California (In re: Fitch, 1998), the bankruptcy court held that while a repossessed car is property of the estate, the right to possess the car was transferred to the lender prior to the filing of the bankruptcy petition. The court interpreted the statutes to mean that the automatic stay freezes the positions of the debtor and creditors. Thus, the lender had the right to maintain possession. The court did state that a vehicle could be returned to a debtor upon the debtor’s giving of adequate protection. In most cases adequate protection means the establishing of proof of insurance and proof that the debtor will be able to make the regular payments on the car.

In the Northern District of California (In re: Cortez, 2010), the Bankruptcy Court interpreted the Bankruptcy Code, and specifically the section on the automatic stay, to mean that a “knowing retention of estate property violates… the automatic stay.” Because a debtor has the right to redeem until the date of a sale by the lender, the vehicle remains part of the estate, and subject to turnover. In this case, the debtor provided adequate protection to the secured creditor. However, the court seemed to say that it was not necessary for turnover.

What to do?

If your car has been repossessed, and you want to make sure you retain possession, bankruptcy may be a solution if you are not able to pay the balance before a lender’s sale. However, while the Northern District seemed to state that adequate assurance is not necessary for turnover, it will ultimately be necessary to avoid a lender’s motion for relief from the automatic stay. Be prepared to show (a) insurance, (b) regular and sufficient income, and (c) an ability to pay for the vehicle.

Things To Consider About Car Loans Before You Seal The Deal

When you have had enough of your old car and finding it very difficult to keep up with the high maintenance costs, it is time to get a new car. If this is what you have often contemplated, but always stop at seeing the money involved, auto car loans can be an option for you.
There are several companies that offer you with such loans. Choosing a good company based on your budget should not be a tough task. There are types of loan that you can get approved for despite a low credit score. Doing a search online for poor credit auto loan lenders should reveal several different offers.

Check Out Your Options

When getting a car loan with a company, make sure you are aware of what you are getting and what the involved conditions are. Never get into a contract for an auto car loan without understanding the terms and conditions in details. This can result in highly undesirable situations later on. Try to clarify each and every point you see and have no doubts left untouched.

State Your Requirements

It is important to understand that the finance companies are always looking to sign up new customers with them as that is what earns them their revenues. Don’t settle straightaway for the offer they place in front of you.
Try to bring down the costs and the money according to your needs as much as possible. It might sound unbelievable but finance companies often bend their rules to suit the requirements of the customers in relation to the auto car loans. Try to take full advantage of this point and don´t settle for the first offer you get.

Type Of Loan

The rates, terms and the conditions vary according to the type of the auto loan you apply for as well. You can see a long payback period with quite low down payments and interest rates if you opt for the secured loans instead of the unsecured loans.
However secured loans require you to fulfill a number of conditions like providing collateral, your credit report, paperwork, etc. Unsecured loans are quicker and simpler to apply for, but include for higher interest rates and shorter payback terms.
Decide which seems to be the best option among the auto car loans for you that fits your budget depending on the above mentioned points. A new car is not an impossible item to get with the options a car loan can provide you with.

Use Your Judgments

Just use your good judgment and don´t get yourself involved in a bad deal without checking out all the different options. There are many places online where you can get a car loan quote where you can compare the different offers and find out how much money you can borrow.

On these sites you can usually also get quotes for cheaper insurance and offers on mortgage loans. I hope this information have been helpful and that you can gained a better understanding on how loans work.

General Auto Insurance Related Info

Are you searching for information related to General Auto Insurance or other information somehow related to Auto Owners INS, Pip Auto Insurance, Grinnell Insurance Agents RI, Safe Auto Insurance, An Ok Auto Insurance or Car Insurance for a Girl? If yes, this article will give you helpful insights related to General Auto Insurance and even somehow related to Collector Car Insurance Rates, Rebate Credit Card Offer, Car Insurance Definitions, Commerce Auto Insurance, Get A Free Car Insurance Quote and Performance Car Insurance Quote that you might not have been aware of.

The best thing about online auto insurance quotes is that they will take very little time to complete, and you will know almost immediately how much you can expect to pay, and all with no obligation to sign. This means you can easily shop around for the absolute cheapest car insurance rates available to you until you find one you are comfortable with. There are much too many people paying unnecessary high rates for their insurance coverage as a result of that they are not aware of the simplicity of free or extremely very cheap auto insurance quotes. It is definitely to your advantage to consult online auto insurance professionals, who are striving to bringing contentment to the public concerning insurance coverage. It is well worth the short time it takes to find out.

However, the single most important thing that’s most likely to save you money when buying auto insurance is to carefully shop around. Of course it is a pain and not a very fun or good way to spend an afternoon, but it can really save you a lot of money in the long run on your automobile insurance premiums. When your insurance needs to be renewed it is very tempting to sign the check and not check for better rates elsewhere, but this could be costing you a great deal of money. With a bit of effort you can achieve or realize a real saving on your auto insurance and this can make your driving a lot more affordable.

Always try to maintain a good credit record. This assists in fetching you a good insurance policy for most often insurers use the person’s credit information to rate auto insurance policies.

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Higher deductibles are another way of getting low cost auto insurance. When you increase your deductibles, you lower your premiums by as much as 15 to 30 percent. Call your low cost insurance agent or check online to see what kind of impact changing your deductible, will have on low cost auto insurance. For example, if your existing deductible, is four hundred dollars, see what would happen if you raise it to six hundred dollars, or even eight hundred dollars.

If you have an older car worth in range $1000 – $2000, you might be better off dropping the collision coverage. Check to see if your collision premium is more than the value of the car.

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By: deepak kulkarni