The thought of having your car repossessed can be overwhelming and scary. For many people, having access to a vehicle is essential for making a living or caring for family members. Unfortunately, Illinois repossession laws do little to help consumers prevent repossession or redeem their vehicles. In this blog we will discuss Illinois’ repossession laws and how bankruptcy can help prevent repossession or force creditors to give your car back.
In general, repossession is the process through which a creditor, such as a lender, bank, or other secured creditor, seizes your car after defaulting on an auto loan. Creditors are legally able to do this because your car serves as collateral ensuring you comply with the terms of the auto loan, i.e., if you default on your auto loan the creditor can recoup their losses by selling your car.
When can a creditor repossess your car?
In Illinois, a creditor can repossess your vehicle after just one missed payment and are not required to give you any prior notice. However, in some cases, your auto loan may provide you with a grace period allowing you to repay the default within a specified amount of time before the lender attempts repossession. It is important to read and understand the exact terms of your auto loan before signing because the underlying terms of the contract will dictate most of what the creditor can or cannot do.
Apart from the auto loan itself, Illinois’ repossession laws, which can be found under 225 ILCS 422 of the Illinois legal code, protect consumers by prohibiting creditors from “breaching the peace” while attempting to repossess a vehicle. This means that creditors or repo men cannot mislead you or force their way into a locked garage or gated area in an attempt to retrieve your car.
What are your rights after repossession?
After your vehicle has been taken, the lender must send you a written notice within 3 days of seizure. This notice will inform you that your vehicle was repossessed and list your legal remedies.
In Illinois, you have two primary ways to get your car back:
- If you have paid off more than 30 percent of your loan at the time of repossession, you can redeem your vehicle by paying back the entire amount owed, including past due payments, late fees, and repo costs within 21 days.
- If you have paid less than 30 percent of your loan, you can redeem your vehicle by paying back the entire remaining loan balance before the vehicle is sold.
As you can imagine, in practice neither option is normally feasible. If you fell behind on your car note for being unable to make payments, it is highly unlikely you will be able to pay the full balance or the entire default with added costs within the allotted amount of time. Luckily, federal law provides you a cost-effective alternative under the United States Bankruptcy Code. By filing for bankruptcy, not only can you prevent repossession or get back your car back after repossession, but you can also eliminate any other debt you may have.
How can bankruptcy help prevent repossession or get your car back?
Filing for bankruptcy immediately prevents creditors from attempting to collect on any debt you may have, including repossessing your vehicle. Depending on your specific circumstances, you could file for either Chapter 7 or Chapter 13 bankruptcy.
In a Chapter 13 bankruptcy, you can stop repossession and repay the loan through a reorganization plan approved by the court. In your Chapter 13 plan, you can restructure your loan to reduce the interest rate and even the principal balance if the car was purchased more than 910 days prior to filing for bankruptcy. Additionally, if your car has already been repossessed, but not yet sold, filing Chapter 13 can force the creditor to give you back your car through a turnover proceeding.
In a Chapter 7 bankruptcy, the automatic stay will delay the creditor from repossessing your vehicle affording you time to regroup your finances and possibly work something out with the lender. You can also redeem the vehicle, reaffirm on the vehicle by negotiating with the creditor, or surrender the vehicle and eliminate the remaining debt.
Talk to a bankruptcy lawyer in Chicago to explore your options.
If you have fallen behind on your car payment or are worried about your vehicle being repossessed, don’t hesitate to contact DebtPros for a free consultation at (312) 883-5422. When you call you will speak directly with a bankruptcy lawyer – not a paralegal or staff member – who will thoroughly discuss your legal options and remedies.
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