Vehicle Repossession

One of my biggest concerns as an attorney representing consumers in Bankruptcy is that they often wait too long to file. Waiting, as I have written about in past blog posts, diminishes your ability to recover in your post-bankruptcy life. All too often, in their effort to avoid filing Bankruptcy, folks are selling or liquidating assets that are fully protected by bankruptcy exemption laws, like home equity or retirement savings to make payments on toxic debt that they end up filing bankruptcy against anyway. In January 2021, the Supreme Court of the United States gave yet another reason to avoid delaying filing a case with the decision in City of Chicago v. Fulton.

In the Fulton case, the City of Chicago had impounded citizens’ vehicles for failing to pay parking tickets.  Four of those citizens filed Chapter 13 cases and demanded the return of the vehicles, but the city refused to release the vehicles as had been normal practice under the U.S. Bankruptcy Code.  Having lost challenges in the Bankruptcy Court and the Appeals Court, Chicago took the consolidated cases to the Supreme Court where they prevailed.  Chicago was not required to return the vehicles simply because the citizen filed a Bankruptcy case.

What, you may ask, does this have to do with delaying filing a case in Bankruptcy?  It is important because a repossession by your auto finance company could mean that your only recourse is to fully reinstate your loan within your state’s time period to “redeem” the vehicle.  In Texas, that time period is 10 days.  It is not likely that most consumers can reinstate a loan given that they were unable to make regular payments leading up to the repossession.  Prior to Fulton, filing a Chapter 13 Bankruptcy petition could get your vehicle immediately released, but now, that is not necessarily a guarantee.  For this reason, it is absolutely critical that anyone considering filing Bankruptcy, particularly if they believe that repossession is imminent, should seek legal advice without further delay.  Filing your case BEFORE the repossession absolutely stops the effort to collect the vehicle through the use of the “Automatic Stay” provided for by the Bankruptcy Code.  Once the repossession occurs, all may not be lost, but the path to retrieval of your car is significantly more complicated in light of this new decision.  The moral of the story is – DO NOT WAIT TO SPEAK TO AN ATTORNEY ABOUT YOUR OPTIONS.