Is a Car Repo Legal During Bankruptcy?

Once you file for bankruptcy, a car lender cannot repossess your vehicle without permission from the court. If you are behind in your payments, however, it's likely that the court will eventually allow the repossession to proceed. Here's how it all works.

Bankruptcy's Automatic Stay

When you file for bankruptcy, the court issues an "automatic stay" which prohibits your creditors from contuining with their collection efforts. The definition of "collection" extends to a repossession. So, if you are behind in your car payments, the lender cannot repossess your vehicle once you've filed for bankruptcy. 

Lifting the Stay

Creditors do not have to wait until the bankruptcy is over, however, to continue collection efforts. The creditor may file a Motion to Lift the Stay. This is a formal request to the court, asking for permission to proceed with collection. If you are behind on your car payments, and it doesn't appear that you will be able to keep your car in the long run, the court is likely to lift the stay. Bankruptcy courts aren't eager to delay a repossession that is bound to happen down the line.

Learn More About Car Repossessions and Your Options

If you want to learn more about the car repossession process and your options once it's been respossessed, see Car Repossessions and Auto Loan Charge Offs. If you are behind in your car payments, or your car has already been repossessed, and you want to know if bankruptcy will help, see Will Filing for Bankruptcy Get Back a Repossessed Vehicle?