Will Bankruptcy Help If My Vehicle Has Already Been Repossessed?

Bankruptcy will absolutely stop repossession of your vehicle if the case is filed prior to the vehicle being recovered by the lender.  Upon filing for bankruptcy protection, the Automatic Stay of Bankruptcy is triggered, which is a powerful injunction against your creditors that keeps them from pursuing any further collection actions against you, including repossessing a vehicle.  The lender will be notified of the bankruptcy filing and cease any effort to repossess the vehicle, knowing that if they take the vehicle, they will not only have to return it, but may also be subject to court sanctions for violating the Automatic Stay.  

In Chapter 7, the relief provided is often short-lived.  The lender will likely file a motion with the court seeking to remove the protection of the Automatic Stay from the vehicle.  Once the Automatic Stay is lifted for the vehicle, the lender will again seek to repossess it.  The only ways to avoid this are to bring the payments current in short order, negotiate a deal with the lender to bring the payments current over time, or file a motion to redeem the vehicle under Section 722 of the Bankruptcy Code.  If the vehicle has been repossessed and then you file for Chapter 7 protection, the lender will likely not be required to return the vehicle and the only way to recover it would be to bring the payments current (and usually pay for the cost of the repossession).

In Chapter 13, the relief provided by the Automatic Stay will last for the life of the Chapter 13 plan, so long as the debt on the vehicle is accounted for and treated in the plan.  Protecting financed vehicles that are in arrears is one of the primary reasons that individuals file for Chapter 13 bankruptcy protection.  If the vehicle was repossessed before filing, the lender will usually be required to return the vehicle on demand after the Chapter 13 case is filed so long as the vehicle has not yet been sold.  A vehicle sold properly after repossession can generally not be recovered.  The vehicle will remain protected so long as you continue making the payments required in the Chapter 13 plan and you maintain the other terms of the financing, most importantly keeping the vehicle insured.  If you fail to maintain your payments, or if you let your insurance lapse, then the lender does have the right to request that the court remove the protection of the Automatic Stay from the vehicle, and they will again be able to repossess it.  If you make all of your payments and keep the vehicle insured, the vehicle is usually paid in full, or at least fully current, when you receive your discharge.  

It should be noted that there has been case law developed at the U.S. Supreme Court level that calls into question whether a lender is required to return a repossessed vehicle upon the filing of a Chapter 13 bankruptcy.  Since the decision was handed down, most lenders still return vehicles without too many issues, but it is less certain that it has been in the past.  Your attorney will advise you if your particular lender in your jurisdiction acts in a manner outside of what has been described above.