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.