Can I keep my car if I file Chapter 13 bankruptcy?
Keeping your vehicle and paying less than the full balance owed on your vehicle loan is within the realm of possibility in a Chapter 13 bankruptcy case. In some instances, it is also possible to lower your vehicle loan’s interest rate and change other repayment terms of the loan. When you file a bankruptcy under Chapter 13, the amounts that you are required to repay on your debts, including a vehicle loan, are determined by the requirements of the bankruptcy laws. In Chapter 13, one payment is made each month for a period of 3 to 5 years to cover all of your debts. This can include vehicle loans, mortgage arrears, rent arrears, tax debts, credit card debts, utility debts, medical debts, and more. Often, the amount of the monthly payment is significantly less than the amount a person is paying monthly outside of the bankruptcy.
How is the amount to be paid on a vehicle loan determined in Chapter 13 bankruptcy?
If a vehicle was purchased more than 910 days prior to a Chapter 13 case filing, the amount that must be paid on the vehicle loan is determined by the replacement value of the vehicle, not the balance owed. For example, if the vehicle value is $10,000 and the balance owed is $20,000, as long as the vehicle was purchased more than 910 days prior to filing, the filer would only be required to pay back $10,000 to pay off the car loan and get the title to the vehicle. In that example, the person’s vehicle would be paid monthly through the Chapter 13 plan and the monthly amount being paid toward the vehicle would be much less than the car payment the person was making prior to filing. For vehicles purchased less than 910 days prior to a Chapter 13 filing, the balance owed on the vehicle would need to be paid and would not be determined by the replacement value. However, it may still be possible to change other terms of the car loan such as the length of time in which the loan is paid off and the interest rate. These changes can also result in lower monthly payments and better repayment terms.
What if you are behind on your vehicle payments?
Chapter 13 will stop vehicle repossession. If you have fallen behind on your vehicle loan payments, bankruptcy can protect your vehicle and potentially make your monthly payments more affordable going forward. Additionally, if your vehicle was recently repossessed, Chapter 13 may be able to help you get your vehicle back and get your finances back on track.
How can you learn more about your vehicle loan options in bankruptcy?
Financial Freedom Legal offers free consultations to help you explore your options. We are happy to meet with you by phone, virtually, or in-person at our office. We also offer appointments after business hours and on the weekend. Your journey to financial freedom is only a click or call away,
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