Can my the lienholder on my car take it if I included it in my Chapter 11?

I received a discharge for my Chapter 11 today. I filed it on my own. I listed my vehicle on schedule C as exempt. No notice on the discharge paper about the outcome. On the back side of the notice it states that “a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor’s property after bankruptcy, if the lien is not avoided or eliminated in the bankruptcy case.” I did list the creditor on the papers and the amount of loan outstanding. Based on my understanding I claimed the value of the car and debt outstanding (about $3600) and understood the exemption for a car and homestead allowance covered it. Can the creditor take the car?

Asked on August 22, 2014 under Bankruptcy Law, New Mexico

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

Yes, the lienholder can most likely take the car. A bankruptcy affects the debt, not the lien. That means that the lienholder may not be able to sue you for the amout of money you owe (which is often greater than the current-value of the car), BUT if the note, financing, etc. is not paid, they have the right to take the property (the car) back--that is, to repossess. The bankruptcy *will* delay that for a time--during the period that the "automatic stay" is in place, they cannot repossess; though they can file a motion with the court to have the stay lifted, or removed, as to them so they can repossess (and in any event, the stay is not forever). However, ultimately, if there was a lien or security interest in property, the only way to keep the property is to pay the debt or negotate with the lienholder, to get them to, for example, accept a lesser amount or smaller payments. If you do not pay and do not work something out with them, they should be able to take the car.


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