How Chapter 13 Can Save Your Vehicle and Lower Your Payments

For many Georgia consumers, a car is more than transportation: it’s the key to keeping a job, caring for family and managing daily life. When car payments become unmanageable or repossession feels imminent, Chapter 13 bankruptcy gives you court-supervised protections that can stop repossession while allowing you to reduce interest rates and lower the amount of the loan balance.

When a Chapter 13 case is filed, the automatic stay immediately stops repossession efforts, collection calls and lawsuits. If your car has already been repossessed but has not yet been sold, Chapter 13 may allow you to recover it. This protection is especially important in Georgia, where lenders often move quickly once a borrower falls behind.

Chapter 13 also allows you to pay off your past-due car payments as part of a three- or five-year monthly repayment plan if more than five years remain on the loan. You must keep current with the remaining car loan payments going forward. However, if there are less than five years remaining on the loan, the entire balance can be paid through the Chapter 13 plan.

In some cases, Chapter 13 can even reduce the loan balance through a process known as a cram down. This means that if the total outstanding loan amount exceeds the fair market value of the vehicle, and you bought the car more than 910 days before filing for Chapter 13, you may be able to lower what you owe to the vehicle’s current market value. For example, if you owe $22,000 on a car worth $12,000, the loan balance is reduced to $12,000 and is converted to unsecured debt. 

Georgia’s exemption laws add another layer of protection. The state allows you to shield up to $5,000 of vehicle equity and if your car is worth more than the exemption, Chapter 13 can still protect it by allowing you to repay the non-exempt portion over the life of the plan.

Another major benefit of Chapter 13 is the ability to reduce your interest rate. Many Georgia drivers carry high-interest subprime loans. The court can reset the interest to what is known as the Till rate, which is computed by taking the national prime rate adding a small risk factor, such as 1 to 3 percent. This lowered rate applies even if you cannot cram down the car loan.

What’s more, a Chapter 13 plan requires repaying only a portion of unsecured debt over the plan’s lifetime, with the rest being discharged at the conclusion. And if your car was repossessed and sold before filing for Chapter 13, any remaining deficiency balance can be treated as unsecured debt, which means you only have to pay a fraction of it over the life of the plan. 

At Jeff Field & Associates, our attorneys advise Georgia residents on debt relief, including use of Chapter 13. We have convenient locations in Bogart, Decatur, Douglasville, Gainesville, Lawrenceville and Marietta. Contact us online or call 404-381-1278 for a free initial consultation.