This is one of the most common questions people ask. Will I lose my car when I file for bankruptcy protection? There are a lot of rumors and misinformation swirling around that filing bankruptcy automatically makes you lose your car. In reality this is far from the truth. In fact most of the Ch 13 cases we file are to help people keep their cars and reduce their ongoing monthly car payments.
A Ch 13 bankruptcy is a payment plan bankruptcy that can help clients keep their car no matter how far behind they are on payments. There are some great tools in a Ch 13 bankruptcy that can even allow you to pay less on the car than you owe on the loan and still receive the title to the vehicle at the end of the plan. In a Ch 13 bankruptcy, if you have owned your car for more than 910 days or if you have re-financed the loan then you have the ability to pay your car back at the value of the vehicle rather than the loan amount. This can be a huge benefit for those clients who owe a great deal more on their car loan than the value of the car. As an example, lets assume your car loan payoff is currently $25,000.00 and you have owned the car for 3 + years. Lets say the car currently only has a value of $15,000.00. This means in a Ch 13 bankruptcy plan you can wipe out $10,000.00 of negative equity in the car loan and still receive your title to your car at the end of the Ch 13 plan. Currently in a Ch 13 you can also pay the car loan at the interest rate of 5.25% which in many cases can help reduce your car payments further. A Ch 13 is a great plan to help keep your car and lower the payments or catch up severely delinquent payments. Even if the car is in repossession status we can still help save that car.
A Ch 7 bankruptcy can also help you keep your car loan and establish a plan to help rebuild your credit. If you are current on your car loan and want to keep paying for the vehicle then you can keep paying the ongoing payments while filing a Ch 7 bankruptcy and retain the car. After you file the bankruptcy you can also sign what is called a reaffirmation agreement to have the car loan report on your credit and help rebuild your credit. Another option in a Ch 7 Bankruptcy that many clients are now choosing is to surrender their car that they have and purchase a newer car soon after filing the Ch 7. Some lenders will lend money to you immediately after you file for Ch 7 bankruptcy. This means if you have a car that is not working properly or you received a bad loan or high interest rate when you bought the car you could surrender that car in the Ch 7 and purchase a newer vehicle with better terms. As an additional bonus this new car purchase can help rebuild your credit going forward. We can help you arrange this so that you are not left even a day without transportation.
If you have any questions about getting help keeping your car in a bankruptcy please call us today. As always at Wootton and Wootton you can speak with an experienced bankruptcy attorney on the phone about your many options.