If I file bankruptcy, will that take care of a car title loan?

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If I file bankruptcy, will that take care of a car title loan?

Asked on April 1, 2015 under Bankruptcy Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

Define what you mean by "take care of." Bankruptcy can discharge the loan, and in the process, depending on your finances, your amount of debt, etc. will have to pay either a fraction of the loan value or possibly nothing on the loan. BUT it does not affect the lender's security interest, and if you do not pay the loan, they can repossess the car (though they wil have to wait until the end of the "automatic stay" period or get a court order allowing them to repossess early). In practice, that means that you have a choice: keep paying the loan and keep the car; or stop paying, let them take the car (if they want it), and not be responsible personally for any remaining or unpaid/unsatisfied part of the loan. You can escape the debt, but you can't do that *and* also keep the car.


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