You usually have a limited time period to get pawned property back. If you're within the time period, you still have a legal right to the property, so you need to list it on your bankruptcy forms. The automatic stay will also buy you an additional 60 days to repay the loan and get your property back. If the time period to get your pawned property back has passed, filing bankruptcy won't help you get your property back, but it can help you discharge the pawn debt. You can only get your property back by negotiating with the pawnbroker.
Written by Curtis Lee, JD.
Updated July 28, 2023
Many Americans have experienced the financial challenge of an expected expense. And some look for quick ways to get cash, such as taking property to a pawnshop or working with a title loan company. If you’ve pawned property, you may be wondering how to account for it and what will happen to it when you file bankruptcy. The answers to these questions depend on whether:
You still have the right to get the property back from the pawnbroker or title loan company
The pawned property is subject to the automatic stay
The title loan is dischargeable
The Basics of Pawned Property
When you pawn property, the title or the property serves as collateral. This means you can’t get your property back until you pay off the loan, plus any fees, interest, or other costs. This is what’s called the right of redemption.
This right of redemption is governed by state law and the terms of the contract you signed when you entered into the loan agreement. Unfortunately, most pawn transactions end with the loss of the pawned property for two reasons:
Interest rates are incredibly high.
The time frame to pay back the loan is often very short. Depending on state law and the terms of your loan, you may have only 30 to 60 days to pay back your debt and redeem your property.
Do I Need To List Pawned Property When I File Bankruptcy?
Under the Bankruptcy Code, you’re required to list all your debts and assets in your bankruptcy petition. Whether you’re required to disclose a pawn loan or title loan transaction during bankruptcy depends on when you pawned the item.
If you still legally own the pawned property or have a right to it when you file bankruptcy, then you should list it in your bankruptcy forms when you first file your petition.
If you still legally own the pawned property or have a right to it when you file bankruptcy, then you should list it in your bankruptcy forms when you first file your petition. Whether you have physical possession of the property doesn’t matter. If your pawn transaction occurred a while back and you lost your right to redemption, then you probably don’t need to list it when you file bankruptcy.
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Pawned Property as Secured Debt
Under the Bankruptcy Code, pawn loans and title loans are classified as secured debts. That’s because your property serves as collateral “securing” the loan. If you fail to repay the loan, the pawnbroker can sell the property to recoup the money it loaned you. And a title loan company can legally repossess your car, motorcycle, or other titled property if you default on your loan payments.
The Bankruptcy Estate and Pawned Property
The upside of listing pawned property on your bankruptcy petition is that it becomes part of your bankruptcy estate. This means it’s usually protected by the automatic stay. Your creditors, including pawnshops and title loan companies, can’t sell your property while the automatic stay is in effect.
Limits to the Automatic Stay in Pawn Transactions
As nice as it is, the automatic stay does have limitations. Specifically, it doesn’t pause the right of redemption period in your pawn contract. But it does extend the right of redemption for 60 days. For example, if there were two days left in your contract to pay the remainder of your loan and redeem the pawned property, the automatic stay will give you a total of 62 days to redeem your property.
Keep in mind that the automatic stay can’t last longer than this period of time, even if your bankruptcy petition remains active for years, which is typical in Chapter 13 bankruptcy.
But if your right of redemption period has passed when you file your bankruptcy case, the automatic stay doesn’t affect the property. You can discharge the pawn debt in Chapter 7 bankruptcy. But discharging the debt help you get the property back.
You have to repay the debt to get the property back. You can also negotiate with the title company or pawnshop to get your property back. But this will only work if they haven’t sold it yet and you agree to either repay whatever amount you owe them or buy it back from them at their price.
If you’re thinking about either option, it’s probably wise to contact a bankruptcy lawyer and schedule a free consultation. During this meeting, you can get legal advice regarding your right of redemption for your pawned property. This will help you understand your options for retaining or regaining ownership of your pawned property.
Generally speaking, if you still have the legal right to get your pawned property back, then you’ll need to list the property on your bankruptcy forms when you file. This gives you the protection of the automatic stay. This temporarily prevents the title loan company or pawnbroker from selling the property and may give you extra time to redeem it.
But if your right to redeem the property has passed, you most likely won’t need to list the property on your bankruptcy petition because you no longer have any legal right to the property. Bankruptcy won’t help you get the property back. You can only get your property back if the pawnbroker or title loan company is willing to sell it to you or return it to you after you pay back your loan in full.