When you experience repossession, according to attorneys at Lect Law website, your creditor may still hold you responsible for some or all of the amount owed even after taking your vehicle. If you allow the repossession and then file bankruptcy, according to Lect Law, you may be able to seek relief from the outstanding debt through the bankruptcy case. In addition, repossession will hurt your credit, but creditors may see the repossession as part of the bankruptcy.

On the Other: Repossession Hurts More Than Credit.

If you allow the creditor to repossess the car before bankruptcy, you may find yourself without any form of transportation. In a Chapter 13 bankruptcy, some bankruptcy courts may allow you to reaffirm your car loan then catch up on late payments through the bankruptcy repayment plan. Even in the absence of a bankruptcy case, according to Loan.com, some creditors may work with you to catch up on missed payments as an alternative to repossession and bankruptcy.

Bottom Line

Repossession does affect a credit score, but it may not lower it any more than the subsequent bankruptcy. If you wish to keep your vehicle, consider working out a repayment plan directly with the lender or through the bankruptcy court as an alternative to repossession.

Source:

Credit Report Builders: What Are the Effects of Repossession of a Vehicle?

Loan.com: Effects of Repossession on Your Credit Report

Lect Law: Bankruptcy Questions