Are you in a situation where you cannot afford your car anymore and have offered to turn it in to the bank so that they can sell it? Have they refused to take it? Then bankruptcy might be a solution if you are plagued with other debts, like credit cards and medical bills, that would make it a good option.
Since 2005 there has been a pattern of banks not repossessing vehicles that have been surrendered in bankruptcy. This may be due to the cost of repossession and sale, but it might also be an attempt to coerce payment from the debtor. Here are some possible ways to handle it in a bankruptcy.
Sue for Damages; They Violated My Discharge!
In the 1st U.S. Circuit case of Pratt v. GMAC, the debtors had surrendered the car, but GMAC determined that the cost of repossession outweighed any money that might be realized from repossession sale. However, when the car stopped running, and the debtors wanted to junk it, GMAC refused to give them the title free of the lien, so that they could do so.
The court ruled that the bank's refusal to release the lien amounted to coersion that violated the terms of the debtors' discharge and awarded them damages! Although this ruling is only authoritative in the First Federal Court District (MA, RI, NH, ME, and PR), debtors here in New Jersey (3rd Circuit) should still consider the option of pursuing the bank for damages as well as holding the bank in contempt for the refusal to repossess.
Redeem It for $1
Another possible solution is to make a motion to compel the bank to accept your redemption of the vehicle for $1. The bankruptcy code allows you to retain a vehicle where you pay off the lienholder the actual value of the vehicle in one lump sum. If they have not repossessed it, you can argue that the car is worthless and thus they should accept $1 in return for a release of lien on the car!
Get It Fixed
New Jersey law allows a repair garage to assert a lien on a vehicle for work done. This lien is actually superior to that of the bank! Assuming they would work with you, you could take the car in for an oil change. When you do not pay, the repair shop can invoke a mechanics lien and sell the vehicle after first notifying the bank, who has the option of paying the charges. If the bank doesn't pay, then perhaps the vehicle can be sold back to you for the price of the oil change!
What Should I Do?
If you live in southern New Jersey and are considering filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.
If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.
Not sure whether bankruptcy is right for you? Then check out my book, Am I In Too Deep? A Guide to Knowing Whether You Need to File Bankruptcy in NJ.