Vehicle Loans Bankruptcy
People are generally concerned about what will happen to their car if they file bankruptcy or whether bankruptcy will protect their car from being repossessed. The answer generally depends on whether you file for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Either way, you have options which are better than without bankruptcyeven if you didnt have to deal with the repo man!
Chapter 7 Bankruptcy
You have 3 Choices
- You have the right to redeem your car by paying all amounts still owed under your loan. (Best option if you owe less than vehicle is worth, need the vehicle, and can afford to pay a lump sum).
- You have the right to enter into a new contract with the car creditor in which you agree to continue making payments under the terms of your loan. (Best option if the vehicle is worth more than loan, you need it for work, and you cant afford to redeem).
- You have the right to surrender your vehicle and you owe nothing more on it. (Best option if you owe much more than vehicle is worth).
Chapter 13 Bankruptcy
You have 2 Choices
- You have the right to surrender the vehicle if you dont want it for whatever reason. Any amounts still owed are considered unsecured debt and are paid back together with your credit card and medical bill debt, to the extent there is any money available to do so.
- Make Payments Under Ch. 13 Plan
- You can continue making payments under your new Chapter 13 Plan. This method is especially great if you are behind in payments or have a rather high interest rate. In bankruptcy, your interest rate will be lowered to a reasonable amount and you can catch up on late payments. However, the best part is if you file bankruptcy more than 910 days after you purchase the car and you owe more than its worth. In such instances, you are only responsible for repaying what the vehicle is worth if you want to keep it.
Under either Chapter 7 or Chapter 13 protection, you can either surrender your car or you can continue making payments.