Can Bankruptcy Wipe Out Debt From A Repossessed Vehicle Or Foreclosed Property?

Yes.  When you hold an asset that is secured by a debt, the lender is provided with different treatment, and you have different options as to how to treat them in bankruptcy.  Once the lender has recovered the property through a repossession or foreclosure, however, their treatment in bankruptcy is dramatically simplified.  The lender is generally required to sell the recovered asset in a commercially reasonable manner.  Vehicles are usually sold at auto auctions, real estate at a foreclosure sale.  Proceeds from the sale go to the lender to offset the debt owed to them.  In rare cases, the property is sold for more than the asset is worth, in which case any excess is returned to you.  More commonly, however, the asset is sold for less than what is owed on it.  The remaining balance is known as the “deficiency”.  This deficiency balance is a general unsecured debt and subject to your bankruptcy discharge.

It is worth noting that if your intent in filing for bankruptcy protection is to recover the asset, then you likely must file for Chapter 13 bankruptcy, and you must file before the asset is sold.  Once the asset is sold, it can almost never be recovered by filing for bankruptcy.