In your repayment plan, you'll need to provide for the payment of the arrearage and be able to continue making your monthly payments. If your car has been repossessed and you plan to file for Chapter 13 bankruptcy, contact an attorney immediately. (To learn more, see My lender repossessed my car right before bankruptcy.
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It might be possible to take out a new finance agreement on a less expensive vehicle before going bankrupt. However you must not do this without first taking advice. Call us for more information (0800 044 3194). Can you get car finance while you are bankrupt?
If the lender hasn't repossessed your car when you file for bankruptcy, the automatic stay will prevent the lender from repossessing it until the bankruptcy judge approves your Chapter 13 repayment plan.
As long as the equity is less than the exemption amount (and you claim it on your Schedule C), your bankruptcy trustee can’t touch your car. Chapter 7 bankruptcy is not a way to get a free car.
If you want to keep it, you'll have to pay for it, and one of the ways you can do so is to enter into a new contract with the lender in a process known as reaffirming the car loan. (To learn about other car options in bankruptcy, see Chapter 7 Bankruptcy and Your Car .)
Bankruptcy Erases Car Loans But Not Car Liens Bankruptcy works by breaking the contract requiring you to repay the lender for the car loan. You can file for bankruptcy, give the car back to the lender, and not pay anything further on the car loan.
If you give the car back as part of your bankruptcy filing, you're relieved from paying the loan. The discharge protects you even if the car sells for less than what you owe.
If you don't sign a reaffirmation agreement, the lender can repossess your car after your case closes and the automatic stay lifts. Some car lenders are known to repossess the car immediately, even if you are current on payments.
Everyone can keep a car in Chapter 13 bankruptcy, even after falling behind on payments. You'll keep all of your property in Chapter 13, including cars, because the Chapter 13 repayment plan affords benefits that aren't available in Chapter 7.
If you file for Chapter 7 bankruptcy and local bankruptcy laws allow you to exempt all of the equity you have in your car, you can keep the vehicle—as long as you're current on your loan payments. And if the market value of a vehicle you own outright is less than the exemption amount, you're in the clear.
The answer is yes—you can file for Chapter 7 bankruptcy and keep your car, truck, motorcycle, or van using your state's motor vehicle exemption. But if the exemption amount doesn't cover all of the vehicle's equity, the bankruptcy trustee can take your car in Chapter 7.
Congress says that all debts must be included in bankruptcy, even if they survive the bankruptcy. The lenders also stop reporting the payments on that loan even though you are still making them. This explains why payments don't show up on credit reports.
Reaffirming has no effect on credit score 205 (Bankr. S.D. Cal. 2020) after she heard testimony from the lender bank and credit experts.
When a lender receives your completed reaffirmation agreement, it will file it with the bankruptcy court. The court will then schedule a hearing to discuss the reaffirmation and decide whether or not to approve the agreement.
You own your vehicle outright The official receiver will only let you keep your vehicle if it's essential and of low value. A vehicle may be classed as essential if: You couldn't do your job without it. You or someone in your household needs it because of a disability.
If the amount of your car loan is more than the value of your car (not an uncommon occurrence because cars depreciate so quickly), you might be able to reduce the amount of your loan in Chapter 13 bankruptcy (called a cramdown). Essentially, you can reduce the amount you owe to equal the value of the car.
Selling a vehicle after discharge in bankruptcy and using the proceeds for your own personal reasons will cause the judge to cancel your bankruptcy proceedings. Make sure you pay off your car loan in full immediately after selling the vehicle.
Chapter 13 tools for car loans 1 Reduce principal: In Chapter 13 you can " cram down " a car loan, but only if you took the loan out more than two and a half years ago. To do this, we find the current value of the car. Then we can reduce the principal of the car loan from the current balance, to just the value of the car. So if you owe $9,000, and the car is worth $5,000, cram down reduces the balance of your loan from $9,000 to $5,000. 2 Reduce interest: For many car loans in Chapter 13, you can reduce the interest rate on the car loan from an exorbitant rate to something more reasonable. In past cases we have reduced interest rates to somewhere between 4 and 6 percent, typically. This can be a big help for subprime car loans. 3 Catch up on arrears: In Chapter 13, if you're behind on a car loan, you can use bankruptcy to force the lender to accept catch-up payments. So if you're $1,000 behind on the car, you can take those arrears and stretch them over a three-to-five year period, pay a small monthly payment to catch up (say, $20-35 a month in this scenario), and then resume making your regular monthly payments. This is a good option if you're facing repossession.
In Chapter 7, you have three options for dealing with a car loan. These options are to surrender the car, reaffirm the loan, or "retain and pay.". Surrender: If you file Chapter 7 and you wish to get rid of your car with a loan, you have the option of surrendering the car to the bank.
Reaffirmation: Some lenders don't want to let you discharge your personal obligation on the loan, and instead demand a reaffirmation, which is a legal process where you renew your promise to pay the loan, and unfortunately you keep your personal liability. Typically, it's credit unions that tend to demand reaffirmation agreements, and a few banks out there. Ask your attorney if your lender will accept retain-and-pay or demand a reaffirmation. If you choose reaffirmation, you will likely have to go to bankruptcy court so that the judge can explain the consequences to you and make sure you understand.
The upside to this is that you can walk away from the loan, without having to pay any deficiency (i.e. the difference between the amount of the loan and the value of the car that you would generally owe if you walk away form a car loan.) The deficiency is wiped out in a Chapter 7 case.
Retain-and-pay: This is the most common option for car loans in Chapter 7. You get to "discharge" your car loan, which means they can never come after you personally for any unpaid amount on the loan. However, instead of surrendering the car, you keep the car, and continue making the payments for as long as you want.
However, instead of surrendering the car, you keep the car, and continue making the payments for as long as you want. Both the borrower and lender act as if the bankruptcy had never been filed. Once the loan is paid off, you can get the lien released, and own the car free and clear, just as if you hadn't filed bankruptcy.
If the filer has fallen behind several times and they are several months behind, then it could result in a dismissal of the case. Usually, if a consumer is falling behind, they should communicate with their attorney so that proactive steps can be taken. They should try to get their payments back on track as quickly as they’re able to. Contact the attorneys at Ziegler Diamond Law: Debt Fighters in Florida for a free case evaluation today. Attorney Mike Ziegler founded our law firm on the principles of professional quality and personal care.
A bankruptcy filer can elect to voluntarily make payments towards a discharged debt, but the lender cannot take steps to collect on the debt. So, it would be purely voluntary on the part of the filer. Sometimes there are strategic or even personal reasons why a bankruptcy filer might voluntarily make payments on discharged debts. For example, if there is a medical service provider that the consumer has a relationship with, they may elect to make the payments on that debt. But again, it’s instrumental that it’s truly voluntary on the part of the file.