Yes. There is an automatic stay that protects you the moment your case is filed, and nobody can take your assets while the stay is in effect. But keep in mind, in a chapter 7, the ten word rule covers most of what you need to know, and that is “If you want to keep your car, make the payments.” So if you are already behind, you will have a few months (or possibly less, if the creditor brings a motion for relief from stay, which they do about 20% of the time) to either get current, or give the car back. (Or, if you have equity, you can sell the car, unless the equity exceeds your available exemptions). Sometimes just those extra few months are all a person needs to resituate their vehicle situation, and save up for the next one.

In a chapter 13, you can actually restructure the car loan, reduce the principal balance down to its value as long as you’ve had the loan  2-1/2 years (and sometimes even more recently purchased or financed cars, in a few other circumstances) and can also reduce the interest rate. In fact, if your car was recently repossessed but hasn’t been sold at auction yet, we can usually get it back for you right away, as long as you can put together a plan that shows you can afford it, and can show it is insured. My experience has been that the effort and attorneys’ fees to do this on an immediate basis often exceeds the amount to get caught up on the car, so you shouldn’t expect heroic efforts if it is clear that you simply cannot afford the car.

The good news, is that if you are upside down on your car, a chapter 7 or 13 bankruptcy will take care of any deficiency.