Keeping Your Financed Vehicle While You’re in Chapter 13

If you’re in deep debt and are considering filing for bankruptcy, you may be concerned about what will happen to the vehicle that you rely on for getting to and from work and for other necessary travel. If you’re steadily employed but besieged by creditors, a Chapter 13 bankruptcy allows you to restructure your debts in what’s called a wage earner’s plan. Although secured debts like car loans remain due and owing, you may still be able to keep ownership of a financed vehicle — even if you are behind on your car payments or your vehicle has been repossessed.

Filing for Chapter 13 bankruptcy can offer you the following ways to keep your vehicle:

• Stop repossession and collection efforts — Once a Chapter 13 bankruptcy case has been filed, an automatic stay goes into effect. This means that creditors are required to stop collection efforts, including repossession of your vehicle.
• Use your repayment plan to catch up with arrearages — You can pay the past-due amount on the car loan through your wage earner’s plan, allowing you to become current on payments going forward. In addition, the general reduction of unsecured debts under the plan can provide you with more spendable funds.
• “Cram down” the loan — If the balance due on the loan exceeds the value of the vehicle, you may be able to reduce the loan in a Chapter 13 bankruptcy to equal the car’s fair market value. The amount that remains becomes unsecured debt. When you “cram down” a car loan in this way, you may also be able to lower your interest rate.

In a Chapter 13 bankruptcy, you usually can pay off the car loan over the course of three to five years based on the terms of your repayment plan.

Even if your vehicle has already been repossessed, you may be able to get it back as long as it has not been resold. Repossessions do not typically occur until a loan payment has been delinquent for 30 days or more. The lender is not permitted to sell it once a Chapter 13 bankruptcy has been filed. Although lenders usually assert that the only way to get back your vehicle is to become current on the loan, this is not the case. All you need to do is show the lender proof of your bankruptcy filing and proof of full coverage insurance.

Jeff Field & Associates helps clients with filing Chapter 13 bankruptcies throughout the Atlanta metropolitan area. We have offices in Bogart, Douglasville, Gainesville, Lawrenceville, Marietta and Decatur. To schedule an appointment, call 404-381-1278 or contact us online.