We have started seeing an uptick in the number of calls we are receiving from clients who need help to stop a repossession or to get a car back that has been repossessed. The COVID-19 pandemic caused a slowdown in repossession activity, but it appears that they have resumed. Our Jackson, MS office has stopped several repossessions this week. Here is an overview of how bankruptcy may help if you are facing repossession.

How does repossession work in Mississippi?

If you fall behind on your car payments, repossession is the tool that lenders can use to take possession of your car. Their ultimate goal is to auction your car and apply the proceeds to the balance you owe. There is no set amount of time that you must be behind before a repossession is allowed. We often have people call in flabbergasted because the bank is repossessing their car when they are only a couple of months behind on the payment. Unfortunately, the lender can repossess your car if the monthly payment is only 1 day late.  

The lender can take your car as long as they can take possession without “breaching the peace”. Basically, they can take it as long as they obtain possession without entering a closed-off area. If your car is sitting in your driveway, then it can be repossessed as long as the tow truck can access the vehicle. They usually cannot enter your closed garage or open a fence to take your vehicle. They can take your car from a parking lot while you are in town or at work.  

Once the bank has possession of your car, their main goal is to convert the car to cash.  They must hold your car for 10 days prior to auctioning it.  The 10 day period is known as the redemption period.  During that 10 days, you are allowed to “redeem” your car if you can pay the balance.  You must pay the car loan in full to “redeem” the car.  If the car is not redeemed, then it will be auctioned.  If the bank does not receive enough money from the sale to pay off the loan, then you will still owe a balance on the loan.  This is known as a deficiency balance.  The lender can demand payment, turn over the loan to collections, or sue you for the balance.

Title loans have special rules.

If you have a title loan on your car and it is repossessed, the redemption rules do not apply.  Ownership of your car transfers to the lender at the moment they take possession of your car.  In this situation, you do not have a legal right to regain possession by paying the balance.  Also, a bankruptcy will not help you regain possession if a car is repossessed for a title loan.

How does bankruptcy help with a repossession?

Filing a Chapter 7 or a Chapter 13 can help with repossession in different ways.  Chapter 7 is a straight bankruptcy and is most useful if you want to walk away from the car and eliminate the debt.  A chapter 7 bankruptcy will usually eliminate a deficiency balance that is owed after a car is repossessed.

Chapter 13 bankruptcy can help you stop repossession and sometimes get a repossessed car back.  Chapter 13 is like debt consolidation and can be used to help you keep a car when you have fallen behind on the payments.  

If your car has already been repossessed and you want to get it back, then time is of the essence.  When a car is repossessed, a bankruptcy must be filed prior to the auction of the car in order for us to force the return of the vehicle.  This usually means that we must file a bankruptcy case within 10 days of the car being repossessed.  Once a case is filed, it usually takes a day or two before the car is released back to the borrower.  

If you need help keeping your car, call our Jackson, MS Bankruptcy Lawyers to keep you from being a victim of repossession.