Can They Take Your Car in a Bankruptcy if You Did Not File Your Car?
- Bankruptcy courts are serious about maintaining the integrity of bankruptcy system. All people filing for bankruptcy are required to undergo pre-bankruptcy counseling with a nonprofit credit counselor certified by the U.S. Trustee Program, a part of the U.S. Justice Department. During the counseling session you are told what is expected of you, and that includes being truthful on your bankruptcy application. You are expected to report everything you own--even paperback books and old golf clubs. Not reporting a car will not be viewed favorably by the court.
- Seek the advice of a bankruptcy attorney if this has become an issue for you. If the car is financed, the only issue for the lender is the monthly payments. The lender may be unaware of the bankruptcy because you did not list the car in the bankruptcy petition. In that case, the lender may be satisfied because you have continued to make timely payments despite the bankruptcy. The bigger issue is possible action taken by the judge.
- You will have to start over with a new bankruptcy filing if the judge dismisses the case because you violated the rules. In the meantime, a legal injunction automatically included in bankruptcy cases, called "the automatic stay," will be lifted after your case is dismissed. The automatic stay prohibits debt collectors from collecting from you while you are under the protection of the bankruptcy courts. Lawsuits cannot be filed against you, judgments aren't enforceable and wage garnishment is not allowed. Creditors and debt collectors will be notified when the automatic stay is lifted, and collection efforts will resume in full force. It will be important for you to re-file for bankruptcy as quickly as possible to regain protection under the automatic stay.
- It's better that you tell the court the car was not listed in the bankruptcy filing than have the judge find out on her own. With the help of an attorney, you may be able to salvage the case by being forthright and honest as you admit to your mistake. If you are forced to re-file, make absolutely certain that everything is listed in the new petition.