Many people dealing with financial problems have tons of questions regarding their economic situation going forward. One of the most popular questions asked is: will I be able to keep my car, truck or other motor vehicle if filing for Chapter 13 bankruptcy?
People can generally keep their cars when they file for Chapter 13, provided they pay some or all of what is owed to the creditors over a span of 3 to 5 years via a payment plan that’s approved by the bankruptcy court. If your car has a high amount of nonexempt equity in it, this may make your payment plan higher. But because most people do not have excess equity in their cars, they are able to keep their vehicles without spending a fortune.
Bankruptcy Repayment Plans
A Chapter 13 bankruptcy repayment plan requires that your disposable income be used to repay your unsecured debts. Only those expenses that are deemed “reasonable” may be deducted when your disposable income is being determined. If you have a large car payment each month, the judge may decide that it is not reasonable to include this expense when determining your disposable income. You may only be able to claim expense for a lower car payment.
If you are behind your car payments when you file, you can keep your car as long as you pay the arrearage, or amount that you’re behind, in addition to paying your regular monthly car payments. A lender cannot repossess your car if you are current on your repayment plan and car loan. When people file for Chapter 13, an “automatic stay” goes into place. This means that creditors are typically prohibited from continuing collection efforts. Even if your car was repossessed before you filed, you may be able to get it back.
Additionally, you may be eligible for a “cramdown,” in which your car loan is reduced if the value of the car is less than what is owed. Your payments would be reduced to the car’s current value, but you must have bought the car at least two and a half years prior.
For more information or for a chapter 13 bankruptcy lawyer, contact DeLuca and Associates today.