Can You File for Bankruptcy on a Repo?
A person who has enormous amounts of debt, enough that his current income will not allow him to pay the debt off without going deeper into debt, may choose to declare bankruptcy. Bankruptcy affords a person a measure of protection from creditors, as it allows a judge to dismiss some of the debts issued against him. However, bankruptcy can only be used in certain contexts.
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Bankruptcy
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Bankruptcy is essentially a declaration by a debtor that the amount of the debts he owes outstrips the amount of assets he currently owns and the income presently available to him. Declaring bankruptcy will annihilate a person's credit rating, but it will usually allow him to make a new financial start by eliminating some of his debts and shielding some of his assets from seizure by creditors. However, not everyone can declare bankruptcy.
Repossession
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Repossession happens when a person defaults on a secured loan. A loan that is secured by collateral allows a creditor to seize the collateral if the person defaults on the debt. For example, if a person secures a debt with a car, then the creditor is allowed to repossess the car, meaning that it is now the creditor's property. Repossessions may factor into bankruptcy, but they cannot be the sole reason for declaring.
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Rules for Filing
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When a person files for bankruptcy, the filing may not necessarily be accepted. A judge will first examine a person's finances and determine whether the person is eligible to file. If a person has a number of debts, including debts from repossession, then the person may be deemed eligible. However, simply having a repossession will not make a person eligible, as his total assets may still outstrip his debt.
Considerations
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Bankruptcy may or may not save a debtor from having his property repossessed, depending on when the bankruptcy is declared. For example, if a person declares bankruptcy before the repossession occurs, then a judge may choose to throw out the debt that he owes on the vehicle, allowing him to keep the car. However, the rules for this generally vary by state. Often, a person will not be allowed to keep a vehicle secured as collateral on a loan.
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