Missouri Laws on Bankruptcy and Car Repossession

Understanding the intricate relationship between bankruptcy laws and car repossession in Missouri is crucial for individuals facing financial difficulties. Bankruptcy is intended to give debtors a fresh start and offer protection from creditors, but the impact on vehicle ownership is an important consideration for many.

In Missouri, bankruptcy laws are primarily governed by federal regulations, although state laws can also affect certain aspects. When filing for bankruptcy under Chapter 7 or Chapter 13, it's essential to know how these proceedings relate to car repossession.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as liquidating bankruptcy, is designed to eliminate unsecured debts. When this type of bankruptcy is filed, an automatic stay goes into effect, which halts collection activities against the debtor, including car repossession. However, this protection is temporary, and car lenders may still seek to repossess the vehicle if the debtor fails to keep up with payments.

In Missouri, you can shelter your vehicle from repossession when filing for Chapter 7 bankruptcy by claiming the Missouri vehicle exemption. As of recent updates, individuals can protect up to $3,000 of equity in a vehicle, making it essential for filers to know their car's current market value.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy serves as a repayment plan, allowing individuals to retain their assets while repaying debts over a three to five-year period. This form of bankruptcy is often more favorable for those who want to keep their vehicles. During Chapter 13 proceedings, the automatic stay protects the vehicle from repossession as long as the individual adheres to the repayment plan.

One significant advantage of Chapter 13 bankruptcy is the ability to “cure” defaults on car loans. If a debtor has fallen behind on car payments, they can include those overdue amounts in their repayment plan, preventing repossession and allowing them to keep their vehicle.

What Happens After Bankruptcy is Filed?

Even though bankruptcy stops repossession efforts, creditors are still allowed to pursue their rights. If the vehicle is financed and the debtor does not make the required payments during or after bankruptcy, the lender can resume repossession activities. In Missouri, car lenders can seek a court order to regain possession of the vehicle if the debt is not satisfied.

An important factor to consider is the reaffirmation agreement in Chapter 7 bankruptcies. This is an agreement between the debtor and the lender to keep the vehicle and continue making payments. Reaffirmation allows debtors to retain ownership of their vehicle while still responsible for the loan obligations. However, it's important to fully understand the implications, as reaffirming a debt can lead to a financial obligation even after bankruptcy is concluded.

Conclusion

The state of Missouri offers specific protections and exemptions for individuals dealing with bankruptcy and car repossession. It is essential for individuals considering bankruptcy to understand their rights and responsibilities to effectively manage their assets and debts. Consulting with a qualified bankruptcy attorney can provide invaluable guidance tailored to individual circumstances, ensuring that debtors make informed decisions during this challenging time.