Right to Redeem a Car is Part of Bankruptcy in Indiana

October 13, 2012 12:30 pm Published by

To keep bringing up to date Indiana bankruptcy information to clients and readers, I stay informed by reading journals and professional magazines. The Journal of Consumer Bankruptcy News is especially helpful, because it reports on court cases that have to do with personal bankruptcy in Indiana and all across the country. Today’s article is about what happened when a certain North Carolina debtor’s car was repossessed right before he filed individual bankruptcy under Chapter 13 bankruptcy law.




Background on the story:

  • Mr. S. owned a Ford Expedition.  His car loan was from Reliable Motors, and Reliable had repossessed the vehicle.
  • Mr. S.’ bankruptcy lawyer called Reliable, informed them of the bankruptcy filing, and demanded the return of the car.  Reliable refused, and even refused to allow Mr. S. to retrieve his personal belongings from the car.
  • The attorney provided reliable with proof of insurance, plus proof that Mr. S. had made his first debt repayment under the Chapter 13 plan.
  • Under the laws of his state, Mr. S. had the right to redeem the car after it was repossessed.  Why?  He had no other car and needed the Ford to get to work.  He had adequate insurance on the car.
  • The bankruptcy court ruled that Reliable was violating the bankruptcy automatic stay, and imposed punitive damages on Reliable.


So, why do I, a debt consolidation lawyer with more than 25 years’ experience, choose to share this particular car story with my Bankruptcy in Indiana readers? This case illustrates three rules that can be of Indiana bankruptcy help:

  • Once a bankruptcy filing is official, the automatic stay prevents the car company from taking the car. If bankruptcy Chapter 13 is filed within ten days of the repossession, the creditor must give the car back.
  • When a car is repossessed, the debtor may still have the option of buying back the car by paying the amount owed on it, plus any expenses the repo company incurred.
  • Any personal possessions that were in the car must be returned to the debtor.

In the North Carolina case, the bankruptcy court ruled in favor of Mr. S..  But that was only because he was represented by an attorney who knew the law and was experienced in bankruptcy. Because the request to return the car was filed within the time limit, Mr. S. was able to get back his vehicle.

The key is to seek professional help before the choices begin to narrow and a bad situation turns worse. The bankruptcy and repossession laws in Indiana are designed as a safety net for citizens who are in financial trouble, but the law can't help if you don't know how to use it!




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This post was written by Mark Zuckerberg

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