Saving Your Car From Repossession: Chapter 13 Can Help

Filing for Chapter 13 bankruptcy can be a strategic move to save your car from repossession. Chapter 13 allows you to reorganize your debts and catch up on missed car payments through a structured repayment plan. Here’s how Chapter 13 bankruptcy can help you prevent car repossession:

Immediate Automatic Stay:

• Upon filing for Chapter 13, an automatic stay is immediately enacted. This legal injunction stops creditors from repossessing your car, giving you time to address the arrears through your bankruptcy plan.

Repayment Plan:

• Chapter 13 involves proposing a repayment plan to the court, which typically lasts between three to five years. This plan will include provisions for paying back the arrears on your car loan, spread out over the duration of the plan, making it more manageable.
• For example, if you’re $3,000 behind on your car payments, and you propose a five-year repayment plan, you can spread out the arrears payment to $50 per month, in addition to your regular car payment.

Cramdown Provision:

• If your car loan is older (typically more than 910 days), you might be eligible for a “cramdown,” where the loan amount can be reduced to the current market value of the car. This can lower your overall payment amount and can be particularly beneficial if you owe more than the car is worth.
• For instance, if you owe $15,000 on your car but it’s only worth $10,000, a cramdown could reduce your loan balance to $10,000, potentially lowering your monthly payments.

Interest Rate Reduction:

• Chapter 13 might also allow you to reduce the interest rate on your car loan, making your payments more affordable and enabling you to catch up on arrears more effectively.

Maintaining Regular Payments:

• While Chapter 13 can help you catch up on past due payments, it’s crucial to make regular car payments that come due after your bankruptcy filing. Staying current on these payments is essential to keeping your car and successfully completing your Chapter 13 plan.

Legal Assistance:

• Navigating a Chapter 13 bankruptcy, especially when trying to prevent car repossession, can be complex. Working with a bankruptcy attorney can provide you with expert guidance, help you develop an effective repayment plan, and represent you in dealings with creditors and the court.

Chapter 13 bankruptcy offers a viable solution for individuals facing car repossession, allowing them to catch up on missed payments and potentially modify their loan terms. By taking advantage of Chapter 13’s provisions, you can work towards retaining your vehicle while reorganizing your debts. However, it’s crucial to adhere to the repayment plan and maintain regular car payments moving forward. Consulting with a bankruptcy attorney can help you navigate the process and maximize your chances of keeping your car.

Repossession Prevention