Bankruptcy 101: Your Car in Chapter 13 Bankruptcy

Keeping Your Car Through Chapter 13 Bankruptcy

Filing for bankruptcy can seem like a scary process because people fear losing assets, such as their car. However, filing for bankruptcy doesn’t necessarily mean that a person will lose all their prized possessions. If you want to get rid of overwhelming debt, but you want to keep your car, you have options. Chapter 13 bankruptcy offers benefits that can help you keep your vehicle.

If you have questions about filing for Chapter 13 bankruptcy, contact our Los Angeles bankruptcy attorneys today at (800) 996-9932 to schedule a case consultation!

If you’re behind on your car loan payments, Chapter 13 bankruptcy can help you catch up. Chapter 13 bankruptcy, or reorganization bankruptcy, allows the filer to restructure their debt into a three- to five-year repayment plan. With this option, the filer could end up discharging some debts while getting more time to pay off others.

What Happens to Your Car Payments in Chapter 13 Bankruptcy?

If you owe more than the car is worth, you might be able to reduce the amount you owe. Chapter 13 bankruptcy has various benefits that can help you keep your vehicle while making your debt manageable, including automatic stays, allowing you time to catch up on car payments, and even reducing the amount of your car loan. Below we have put together some examples of how Chapter 13 bankruptcy can help you keep your car:

Automatic Stay: Once you file for bankruptcy, creditors will stop any collection efforts against you, including the repossession of your vehicle. This process is known as an “automatic stay.” It means that once your bankruptcy application has been processed, creditors can’t repossess your car.
Catch Up on Car Payments: If you’re behind on your car loan and you file for Chapter 13 bankruptcy, you can keep your car if you pay the past due debt and your repayment plan. However, you will need to continue making your regular car payments. As long as you stay current on your car loan and your repayment plan, the lender cannot repossess your car.
Reduce Car Loan: If the amount of your car loan is more than the value of your car, you might be able to reduce the amount of your loan in Chapter 13 bankruptcy. However, this will only be an option if you purchased the car more than two and a half years before filing for bankruptcy.

Do All Chapter 13 Bankruptcy Filers Get to Keep Their Car?

Unfortunately, no since it is on a case-by-case basis. Chapter 13 bankruptcy filers will only get to keep their vehicle if they can afford to keep up with their bankruptcy repayment plan and car loan.

However, you may need to prove that your car payments are a reasonable expense. Since your creditors want to be paid as much as possible, they’ll object if it appears that you’re unreasonably using funds. For example, if you make an excessively high car payment or want to pay for a second car you don’t need, they could challenge your case. Since every bankruptcy case is unique, you should have an experienced bankruptcy attorney review your case to determine the best course of action.

How Can I Protect My Car During Bankruptcy?

If keeping your assets is a priority for your bankruptcy, you will need the guidance of an experienced attorney. Bankruptcy cases can quickly become complex, so it is vital to have an experienced lawyer on your side who can help you achieve your desired outcome. Our team at Wadhwani & Shanfeld has helped over 20,000 individuals throughout California solve their financial problems. We have the knowledge, skills, and experience needed to guide you through the process and help you keep your car after filing for bankruptcy.

Contact our Los Angeles bankruptcy attorneys today at (800) 996-9932 to schedule a case review!