Are you behind on your car payments? Are you worried that your vehicle will be repossessed? Keep reading and learn from a Philadelphia repossession attorney what you can do to protect your car.
For a free consultation on how to quickly get your financial situation under control, call The Law Offices of David M. Offen at 215-625-9600. We are located in Center City Philadelphia — very easy to reach from Philadelphia and the suburbs.
Is Filing Bankruptcy the Answer?
When you receive a notice that your car is going to be repossessed, your first thought probably won’t be, “Do I need to file bankruptcy?” — but it should be.
Car repossession is a form of debt collection under PA repo law. And that means you have fallen behind on paying your car loan. What other bills have you not paid — or paid the minimum balance on, not even covering the interest? Losing your car may only be the tip of the iceberg. You have the ability to act and get your financial situation under control.
If you are in debt, could losing your car make it worse? Maybe you’re lucky to live in the heart of Philadelphia and the car is a luxury for road trips. But if you’re in the Philly suburbs, how will you get to work without a car? Think about the opportunity cost of having to replace the car with public transportation and wasting valuable time commuting, or with Uber and Lyft, which offer similar convenience to a personal car, but are much more expensive for everyday commuting.
Filing bankruptcy will save your car in the short term. But in the long term, it will do something more important: solve the financial crisis that put your car at risk in the first place. It behooves you to have the knowledge of what you can do to quickly improve your financial situation.
Car Repossession Laws in PA
You don’t lose your legal rights and protections because you’ve fallen behind on payments, under PA state law on repossession of a vehicle.
Under Pennsylvania repossession laws, creditors must follow strict regulations when it comes to repossessing the property. If you are not properly notified and/or the creditor otherwise does not follow PA car repossession laws, you may be able to recover your car during the bankruptcy process. So yes, you can get your car back after repossession in PA. Even if you are given proper notifications and the creditor follows PA repossession law to the letter, bankruptcy law gives you rights that in many cases permit you to recover a repossessed car.
What happens when your car is repossessed in PA? Creditors must adhere to the following:
- Peaceful Repossession: Pennsylvania does not allow repo agents to breach the peace when retrieving cars. While they may legally enter open private property, it is a misdemeanor for repo agents to break any locks, force open garages, or use force against the purchaser if he or she refuses to yield the car. The typical auto repo agents will never break into the residence or garage to get to the auto.
- Notice of Repossession: Creditors MUST send you a notice of repossession prior to repossessing your car.
- Sale of the Car: The car must be sold in a commercially reasonable manner, most often at auction.
- Proceeds from the Sale are applied to your account, and as repossession vehicles usually sell for less at auction than what is owed on the loan, there is a deficiency balance, which you will be responsible for.
How Can Bankruptcy Save My Car?
Filing bankruptcy triggers a very powerful protective measure: The Automatic Stay. Title 11 is the Bankruptcy Code and section 362 is the Automatic stay. From the minute you file for Bankruptcy protection until your bankruptcy is either successfully discharged or dismissed for failing to follow a payment plan, this protection will keep creditors from starting any kind of punitive collection actions. They can’t repossess your car or take any action against you without the permission of the Federal Bankruptcy Court—but that’s just the beginning of the protection.
One important item for you to know: a Chapter 13 bankruptcy offers additional benefits to help lower or reduce your auto payments.
First, even though you may have an interest rate as high as 27.99%, by filing a Chapter 13 bankruptcy, the interest rate can many times be reduced to 6%.
Second, if you purchased the vehicle and took out the loan more than 910 days ago, that is 30 months or 2 and ½ years, then the debt you owe can be reduced to the value of the vehicle.
In other words, if the auto is worth $9,500.00, but you owe $22,000.00 on the vehicle, then the secured debt you owe can be reduced from $22,000.00 to $9500.00.
As long as the stay is in place, mortgage lenders can’t start repossession actions against your home, auto lenders can’t go out and pick up your car, and any ongoing repossession actions or sheriff’s sales are immediately frozen.
Why Is Your Car Really Being Repossessed?
The simple answer is that you have defaulted on the car payments and now your car is being repossessed. But debt is not the problem — it’s a symptom of a problem. No matter how it happened, you’ve borrowed more than you can afford to pay back. Sometimes the problem is a medical crisis or a family emergency. A single large debt, like a funeral or a hospital bill, can push someone who was living at the edge of their means over the edge, into perpetual debt and mounting interest. In some cases, the loss of a job by a family member has caused your finances to be thrown into chaos. An unexpected separation or divorce can also wreak havoc on the family’s finances.
Other people might not have a single expense that’s killing their finances. Instead, it’s a pattern of behavior. Each line of credit is used as a blank check, and minimum payments are made each month to avoid delinquency. Sooner or later, this debt spirals, payments get missed, and your personal finances crumble. In addition, even though you are making payments, the interest can be so high that your payments are not accomplishing anything except paying the minimum payment each month.
Whatever the case, filing for bankruptcy might be the smart choice. If you’ve just had a bad few months and are stuck with a high bill from a hospital or a funeral parlor, or an unexpected home repair, Chapter 13 bankruptcy can erase those unsecured debts and allow you to work out a payment plan to get back on track with your mortgage, car payments, real estate taxes or recent income tax debts. Chapter 13 can also freeze any collection activity against you for student loans. Please note, however, that interest is still allowed to accumulate. And if you are simply overextended because of irresponsible spending habits, then a Chapter 7 bankruptcy can help give you a completely fresh start.
A Bankruptcy Lawyer Can Help Stop Repossession of Your Car
If you need an expert to guide you through the bankruptcy process, call The Law Offices of David M. Offen at (215) 625-9600 for a free consultation with Philadelphia bankruptcy attorney David M. Offen.
With over 20 years of experience, David M. Offen has helped more than 12,000 individuals and families go through the bankruptcy process and move forward into a more financially secure future. Our law offices, located in Center City Philadelphia, are very easy to reach from Philadelphia and the suburbs.
Here are some representative examples of how our bankruptcy attorneys have helped people stop repossession:
- We were able to immediately help a client whose car was repossessed. We got the car back, lowered the payments, and arranged to pay back the balance over a Chapter 13 plan. Filing bankruptcy stops auto repossession, retrieved a repossessed car, and can lower monthly payments.
- One of our client’s car payments were over $600 per month and the account was in default by several months. Repossession was imminent. By filing a Chapter 13 bankruptcy case, we lowered the 18% interest rate and substantially reduced her monthly payment. She kept her car!
- A couple came in who were in arrears on three cars. We were able to reduce the amount owed on the first car and also lower the interest rate. The second car we paid the arrears inside the Chapter 13 plan and the couple continued to make the regular car payments. The third car was surrendered and no money had to repaid on the debt owed on the third car.
Many people don’t realize how bankruptcy can help improve their financial life. While these three cases are true stories, and we cannot guarantee the same or similar result in any other matter, we can advise you as to the solutions available to you in your unique financial situation. Knowledge is power and it pays (literally!) to know the law. Call The Law Offices of David M. Offen and schedule your free, no-obligation consultation — you will be glad you did!