When Do I Have to Surrender My Car in Bankruptcy If I Choose to Do So?

Many chapter 7 New York bankruptcy cases feature cars as assets, and for a variety of reasons debtors choose not to hold on to them. One of their options is to surrender them to their auto-loan creditors. Hopefully there’s another option for meeting their transportation needs, but in the meantime debtors may reasonably ask, “When do I have to physically surrender my car?” Here’s the answer.

The answer is that it should happen before the automatic stay is lifted.

It may seem counterintuitive, but just because the debtor promises to surrender property to a lender does not mean that he or she is waiving the automatic stay. It remains in effect for secured property unless one of a few circumstances is triggered:

(1)  The debtor fails to file a statement of intention either within thirty days of filing bankruptcy or by the section 341 meeting of the creditors, whichever is earlier. Essentially, this means that if the debtor fails to file a timely statement of intention, the creditor can choose to recover the vehicle.

(2)  The debtor fails to physically surrender the property within thirty days after the section 341 meeting.

(3)  The debtor receives a discharge.

Once the stay is lifted, the creditor can take normal steps to repossess the vehicle.

Note, and this is very important: If the debtor is current on the auto loan, then the creditor cannot repossess it. It would have no right to do so and in fact no need to do so. Debtors who are current on their payments to secured creditors aren’t problems for creditors.

But in this situation, we’re talking about debtors who want to surrender their cars. Irrespective of whether they’re behind on their payments, it’s better to physically surrender vehicles earlier in the bankruptcy rather than later. Even if they can keep their cars longer, they’re still responsible for the vehicles’ maintenance, insurance, and welfare. Any damage that befalls the vehicle creates liabilities for debtors that occur after the petition is filed and therefore are not protected by the discharge.

The actual surrender of the vehicle can be coordinated with the creditor.

Many debtors need their vehicles for transportation, but sometimes they can’t keep hold of them after a chapter 7 bankruptcy. If you have a vehicle and you are falling behind on your payments, then talking to an experienced New York bankruptcy lawyer can help you choose the best course of action.

For answers to more questions about cars, auto loans, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

Recent Posts

Stay Clear of Payday Lenders, Bankruptcy Is So Much Safer

For too many people, bankruptcy feels like giving up. Choosing other, riskier options may make them feel as though they’re still in control, and who knows? Maybe things will turn around for them. They run down their savings, rely on credit cards, and then as a last resort make a visit to a payday lender.

Read More »

How to Deal with “Zombie Debt” Collectors in New York

At some point, if it believes it will never be repaid, the original bank that makes a loan will sell it to a debt collection company. The loan will be bundled with numerous other ones in the sale, and the price will be a fraction of the total value of the loans. Because of the small

Read More »

How to Use Bankruptcy to Reduce Auto Loan Payments in New York

Many New Yorkers have difficulty with auto loans. In some cases, the car’s value has depreciated significantly, making resale difficult, and in others the car was over-financed to begin with, which is more common when the dealership plays the role of lender as well. Unlike the underwater mortgage, the bankruptcy code offers solutions that are

Read More »

4 Steps to Escape Paying Income Tax on Discharged Debt in New York

Receiving a discharge from the bankruptcy court  in New York is the goal of New York bankruptcy petitioners. It should be a relief so that people can continue their lives. Although, occasionally creditors claim the loans you discharged are forgiven instead; that means you’ll have to pay income tax on the forgiveness. What does this

Read More »

Pop Quiz on Discharging Unsecured Debt in New York

This quiz has a single multiple choice question. Suppose you have more credit card debt than you can pay down?  This is not an uncommon situation—but let’s add a twist: one of your creditors is a family member. The debt situation cannot be resolved without bankruptcy, but you don’t want to create discord among your

Read More »