car loan in chapter 13

Before moving forward, you should understand how bankruptcy may affect your car loan in chapter 13.

Halts Repossession

Perhaps the most critical, and immediate benefit of a bankruptcy filing, is the “automatic stay.” This provision of law prevents your vehicle lender from repossessing or taking any other collection action against you.  If you succeed in confirming a Chapter 13 Plan, and then remain current on your Plan payments, the modification of the car loan should become permanent. Let’s look deeper.

3 Key Benefits – Your Car Loan in Chapter 13:

The biggest potential benefits are:

  1. High interest rates can usually be reduced (5% is common, currently);
  2. The loan repayment period can be extended (up to 5 years);
  3. The amount owed, in certain circumstances, can be reduced to the fair market value of the car (check with us to see if you qualify).

Furthermore, a car owner can typically retain their vehicle in a chapter 13 bankruptcy, so long as they can make the modified car payments.  This is not necessarily true in a chapter 7 (read about your vehicle loans in chapter 7, here).

Have a question?  Bay Area Resident?

Contact Us @:  (510) 227-5325  or fill out our form, below:

EXAMPLE of Modification of Your Car Loan in Chapter 13 :

BEFORE:  Jane Doe purchased a vehicle three years ago. The fair market value of car today: $10,000;  Amount Owed today: $16,000 (this is common – many people are upside down on their car loans).  Current interest rate: 14%.  Time left on the loan: 3 years.  Current loan payment:  $547/mo.

AFTER:  Under these facts, Jane Doe could reduce the debt owed on the vehicle by approximately $6,000 (the difference between the fair market value and the loan balance), while also reducing the interest rate down from 14% to 5% (as of the date of this article).  Jane can also extend the loan term to 5 years.  Instead of her current $547/mo., Jane’s payment would be reduced to: $189/mo.   In 5 years, her vehicle would be paid off.

Other Benefits of Chapter 13

If Jane Doe were also dealing with:

  • a delinquent mortgage, or
  • unpaid taxes,
  • delinquent personal loans,
  • credit card debt,
  • payday loans,
  • medical debt.

She can deal with all these issues in her chapter 13 bankruptcy filing.

While each person’s facts and situation may differ, the above hypothetical is a realistic example of what may happen to your car loan in chapter 13.  To assess your individual situation, we recommend consulting with a local bankruptcy attorney.

If you live in the Bay Area and would like a free initial consultation, give us a ring at (510) 227-5235, or submit your inquiry electronically:

No Fields Found.

Legal Disclaimer

Serving the following locations:

Alameda, Albany, Antioch, Atherton, Belmont, Benicia, Berkeley, Brentwood, Brisbane, Burlingame, Campbell, Colma, Concord, Cupertino, Daly City, Danville, Dublin, El Cerrito, Emeryville, Foster City, Fremont, Gilroy, Half Moon Bay, Hayward, Hillsborough, Lafayette, Livermore, Los Altos, Los Gatos, Martinez, Menlo Park, Millbrae, Milpitas, Moraga, Morgan Hill, Mountain View, Newark, Novato, Oakland, Orinda, Palo Alto, Petaluma, Pinole, Pittsburg, Pleasant Hill, Pleasanton, Redwood City, Richmond, San Bruno, San Carlos, San Francisco, San Jose, San Leandro, San Mateo, San Pablo, San Rafael, San Ramon, Santa Clara, Sausalito, South San Francisco, Sunnyvale, Tiburon, Union City, Vallejo, and Walnut Creek.