Legal Question in Bankruptcy in Virginia

Re: Repossession of vehicle used to secure a loan

The lender can repossess a vehicle only if the debtor is in default. Debtor can be in default by falling behind on the payments, or by filing a chapter 7 bankruptcy WITHOUT reaffirming the debt.

The market value versus loan amount issue is relevant to whether the Court would take the vehicle. If the market value of the vehicle is more than the sum of the loan amount owed and the debtor's exemption amount, then the Court may take the vehicle. The Court would sell the vehicle, give the exempted amount back to the debtor, and then send the balance to any creditors listed in the bankruptcy.