 Repo
man can strike even after bankruptcy
|
 Dear
Dr. Don,
In the event that a car loan is filed in bankruptcy
and discharged, is it possible that the creditor can still repossess
the car? What happens to the title if the debt does not get voluntarily
paid? Just wondering.
-- Lena Loan-loss
 Dear
Lena,
In a Chapter 7 bankruptcy filing, the petitioner
lists all her debts and the bankruptcy court discharges all eligible debts. The
discharge relieves the filer from the obligation to repay those debts. Secured
debts, such as car loans, can be discharged in bankruptcy, but the lender's lien
on the asset survives the bankruptcy discharge.
That
means a car can be repossessed even if the loan has been discharged in bankruptcy.
Title issues are a bit more complex and vary by state law. In some states the
debtor's rights in repossession continue through the lender's required notice
and sale of the car, even when she's declared bankruptcy, but in other states
repossession transfers full ownership of the vehicle to the secured lender. It's
clear that once the loan is discharged, you have no further obligation to repay
it. What's not clear is whether the lender can charge you its legal fees and repossession
costs if they incurred those costs after the bankruptcy discharge. If this situation
crops up, you should discuss it with an attorney. |
