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Using Bankruptcy to Block Repossession

Driver of the car is sitting thinking

If you have a vehicle you rely on but you’re in default on your loan, you must consider all your options for retaining possession. Unfortunately, most areas of the law favor the lender, who has a legal right to take your car or truck through repossession or a process known as detinue. Fortunately, you can block either of these procedures through bankruptcy.

The first resort for the lender is repossession, which is generally accomplished by hiring a third party to locate the vehicle and take possession. The law allows “repo men” to take possession of a vehicle for the lender as long as they can accomplish the task without committing a “breach of the peace.” Courts are divided on what constitutes a breach of the peace, but they generally agree that violence or threats of violence constitute a breach, as does trespassing to reclaim a vehicle. Some courts will allow trespassing when the vehicle is in plain sight in a driveway, but not if the vehicle is in a garage.

Given the limits on repossession, vehicle owners often try to hide their car or truck from the repo man through various ploys. But trying to elude the repo man is stressful and ultimately futile, since the owner cannot watch over the car forever. Eventually the repo man might slip in during an unguarded moment and tow the car away, or arrive early one morning with the sheriff to effectuate repossession without a breach of the peace.

The lender can also get a court order requiring the return of the vehicle. This is a process known as detinue in Virginia.  If the amount owed on the car or truck is less than $25,000, the lender can file an action in the General District Court. The lender must prove the loan is in default, there is a balance owed on the contract, and that the lender has a valid security interest in the vehicle as collateral. The owner is generally given a short period of time to become current on payments before the court issues a writ of possession. If the owner refuses to turn the vehicle over at that point, he is in defiance of a court order and can be fined or jailed for contempt.

However, a vehicle owner who files for bankruptcy gets an automatic stay against all collection efforts. The lender cannot repossess the car or seek an order for detinue. Many bankruptcy filers are able to keep their vehicles through a Chapter 7 bankruptcy exemption, by signing a reaffirmation agreement or through a Chapter 13 bankruptcy payment plan.

If you’re considering consumer bankruptcy, you need reliable, personalized legal advice. Call Miller Law Group, P.C. today at 434-218-3987 or contact us online to make an appointment for a FREE consultation.