Having a car repossessed can be a traumatic experience for anyone. Feeling powerless in this situation is understandable. However, there may be no need to despair! Most Chapter 13 debtors can get their car back once they file for bankruptcy. When a Chapter 13 bankruptcy petition is filed, an estate is created of the debtor’s property. The estate may be comprised of property that is subject to a creditor’s interest. A Chapter 13 filing grants debtors an overriding interest in estate property that trumps even a creditor’s interest in the property.
Now picture in your mind a medieval battle in which one knight has a shield and the other has a sword. In a vehicle repossession situation, the creditor is the knight with the sword, seeking to dismember the debtor. Once a Chapter 13 petition is filed, the debtor has a shield created by the Bankruptcy Code. These provisions prevent creditors from reaching property of the estate. They also work to protect against seizure of estate property both before and after the date of filing.
A debtor uses the protections afforded by the shield by filing with the court a Motion for Turnover. A Turnover Motion is essentially the process of asking a judge to force a creditor to return property of the estate. Where a vehicle was repossessed prior to the petition date, the creditor must give the debtor possession of the vehicle. This is true even in the situation where the creditor had the “lawful” right to repossess under state law.
As you might expect, some creditors will contest a Motion for Turnover. Fortunately for most Chapter 13 debtors, the Bankruptcy Code provides for alternate grounds in which to seek return of a repossessed vehicle. For example, violation of the automatic stay is often a challenge a debtor can make to a creditor’s repossession. And in many states, if the vehicle sustains damage during the physical process of repossession, damages may be awarded. As devastating as having a vehicle repossessed might be, for individuals filing under Chapter 13, relinquishing complete control of the vehicle may not be necessary.