How to Avoid Vehicle Repossession in Minnesota

In Minneapolis and St. Paul, having a vehicle is practically a necessity, especially in the winter months, when snow and ice can make even the simplest commute a challenge. During this time of year, the last thing anybody wants to receive is a letter threatening repossession.

Cars and other vehicles are typically financed by taking out a loan. The loan is often secured by the vehicle itself. In the loan contract, there is language in it giving the lender the right to "repossess" or take back their collateral if the borrower fails to make the scheduled payment on them. The contract itself will generally state how far behind or "in default" a borrower must be before the creditor has the right to repossess the vehicle.

Lenders do not have to tell individuals when they are coming to repossess a vehicle. They can repossess a car at any time.

Before their cars are taken from them, many individuals in the Twin Cities are putting a stop to repossession by filing bankruptcy. Bankruptcy works in a couple of ways to prevent repossession.

First, the moment a bankruptcy is filed, the automatic stay comes into effect. What is the automatic stay? The automatic stay is an operation of law that prevents creditors from continuing to collect on debts that are owed to them. This means that lenders may not continue with efforts to repossess a vehicle while the automatic stay is in effect.

Second, a Chapter 13 bankruptcy can be used to get current on car payments. One of the advantages of Chapter 13 bankruptcy is the ability to reorganize debts to make them more affordable. In some instances, this kind of bankruptcy may help a person afford their car by making the car payment more affordable.

After a car has been repossessed, a lender has a right to sell it, after they have given the borrower notice that they intend to do so. The timeline for selling a vehicle is not long. The car may still be recovered through bankruptcy as long as it hasn't been disposed of by being sold. Because timing is critical, anyone in this unhappy predicament will want to call an experienced Minneapolis bankruptcy attorney right away to discuss their options.

Source:, "Vehicle Repossession: Understanding the Rules of the Road," FTC

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