Can Bankruptcy Help Me Keep My Car?

Stopping car repossession is possible if you file for bankruptcy. As we near the end of the year, many people are facing a harsh reality regarding their finances. If the budget is in very bad shape, bankruptcy may be the only option. Most people facing bankruptcy have already been through the wringer. They last thing they want is to lose an important asset like a car. Expert bankruptcy attorneys stop repossession and help you keep your car all the time. Fortunately, bankruptcy and cars are not mutually exclusive.

Save Your Car With Bankruptcy!

The best way to stop car repossession during bankruptcy is to file for Chapter 13 bankruptcy. This type of bankruptcy includes a debt repayment plan that can be used to repay the car loan arrears while making ongoing payments. If the filer purchased the car two or more years before filing for Chapter 13, the loan amount may be reduced through a process called cramdown. This is particularly beneficial when the car loan balance exceeds the value of the vehicle.

Cramdown allows the loan holder to pay the equivalent of the current value of the car plus interest. Payments are made in equal installments throughout the repayment plan term. Though Chapter 7 provides quick relief from debts, it requires selling assets to repay debt balances and allowing creditors to repossess liened property such as a car. Therefore, it is not the best option if you want to save your car.

The debtor must make all Chapter 13 repayments and complete the plan in order for the vehicle cramdown to be successful. If the vehicle does not qualify for cramdown, the car financing arrangement must still be repaid through Chapter 13. The filer will make car payments to the bankruptcy trustee, not the car loan provider, for the three to five-year repayment plan term. This holds true even if the car loan agreement stipulates a longer or shorter period.

If the car loan is held by more than one individual, co-signers who are not in bankruptcy are still liable for the full loan amount. This is why it is particularly important for the bankruptcy filer to make all payments as scheduled. Otherwise, others who co-signed the loan will be on the hook for the loan payments, incurring unplanned debt of their own.

Individuals who are considering bankruptcy but want to stop car repossession should discuss Chapter 13 bankruptcy with a bankruptcy lawyer. After learning their rights, they can decide whether Chapter 13 is the best solution. If so, they could become debt-free in as little as three years, while retaining their vehicles for business or pleasure use.