If you are considering a Chapter 13 filing, one of your biggest worries may be what will become of your vehicle during the bankruptcy process. If you get behind on your car loan payments, will the lender repossess it? If the loan is worth more than the vehicle, what will happen? Here, you will learn how a Bankruptcy Attorney in Marion IN can help you keep your car during a Chapter 13 filing.
Keeping your Vehicle
During a Chapter 13 case, you get to keep your assets, but you’re required to use your disposable income to gradually pay back your creditors through a court-sponsored repayment plan. If you’re in default on your car loan and you file Chapter 13, you can retain the vehicle if you pay the arrearages and remain current on payments. As long as you make both payments, the lender may not repossess your vehicle.
Car Repos and Automatic Stays
When filing for Chapter 13, most creditors -; including auto lenders – are barred from further collection attempts through an automatic stay. The stay can protect you whether or not the lender has repossessed your car. Lenders cannot repossess a car because of back payments, but you must make payments sufficient to cover the depreciation on the vehicle. Once you file for Chapter 13, continue making payments until your plan is approved by the court.
Auto Expenses: Keep them Reasonable
In Chapter 13 bankruptcy, your court-ordered repayment plan must prove that all of your extra income is going to your unsecured creditors. To determine this amount, you can only deduct your necessary living expenses -; not extras such as vacations and luxury cars. If your car loan amount is more than the vehicle is worth, Chapter 13 through Ripke Law PC can reduce the amount of your loan through the ‘cramdown’ process.
Letting the Vehicle Go
In some Chapter 13 cases, it does not make financial sense to retain the vehicle. If you owe more than your car is worth and you’re not eligible for a cramdown, repossession may be a better option. If you need to file for bankruptcy, but you also need to keep your car, consult a Bankruptcy Attorney in Marion for legal advice specific to your case.
