For most people, a car is a necessity. You use it to get to work, take the kids to school, and run errands. When something happens that causes you to fall behind on your car payments, it can feel like the weight of the world is on your shoulders. You may wonder if there is any way out. The good news is that there could be a very good way for you to get help with your overdue car payments.
For individuals who are struggling to keep up with car payments, Chapter 13 bankruptcy may provide some relief.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a court-supervised process that helps individuals with a regular income create a plan to repay all or part of their debts. This type of bankruptcy is often called the “wage earner’s plan.”
Under this chapter, debtors present a repayment plan to their creditors, which the bankruptcy court must approve. The plan can call for payment of all or just a portion of the debtor’s outstanding debt. A Chapter 13 bankruptcy repayment plan typically lasts three to five years. During that time, they will make regular payments to a trustee, who will then distribute the money to their creditors.
How Can Chapter 13 Bankruptcy Help with Overdue Car Payments?
If you are struggling to make your car payments, Chapter 13 bankruptcy may be a viable solution for you. There are several ways Chapter 13 bankruptcy could help you concerning your car.
Automatic Stay: If you are behind on your car payments, your lender may threaten to repossess your vehicle. Filing for Chapter 13 could stop the repossession process. Because of an order from the bankruptcy court, known as the automatic stay, creditors must cease any collection efforts against you after you file bankruptcy. This includes the repossession of your car.
Catching Up on Payments:If your payments are not up to date and you file for Chapter 13 bankruptcy, they can incorporate the car loan back payments into your Chapter 13 bankruptcy repayment plan that we discussed in the last section. In most cases, your entire car note, including payments you are behind, can be paid through the Chapter 13 Bankruptcy plan. Typically, this allows you to satisfy your entire car note and get a clean title to your car at the end of your bankruptcy.
Reducing Car Loan Amount:Cars lose their value very quickly. This could mean that the amount of the car loan is higher than the car’s value. Chapter 13 allows debtors to reduce the amount owed to a loan up to the value of the asset attached to it, and then convert the rest into non-priority, unsecured debt. Non-priority, unsecured debt may not be required to be paid back in your payment plan. Or you may only have to pay a portion. This feature can only be activated if you have owned your car for at least 910 days, two years, and three months, before filing under Chapter 13.
Get Help Filing Chapter 13 Bankruptcy
If you are struggling to make your car payments, Chapter 13 bankruptcy may be a good solution for you. However, everyone’s financial situation is different and bankruptcy rules can be complex. So, contact us for a free evaluation of your financial situation and let our experienced bankruptcy attorneys help you. We have over 25 years of experience helping clients navigate the bankruptcy process successfully. We will be happy to discuss your options with you and help you create a plan that works for your situation.