A common concern our clients have when they are considering filing for bankruptcy is whether they can keep their vehicle. Below is a quick summary of how vehicles are treated in Chapter 7 and Chapter 13 filings:
When you file a Chapter 7 case, there are three primary options for how to handle your vehicle:
A Chapter 13 debtor is required to submit a repayment plan to the court for approval. The plan sets forth how the creditors will be paid, including the lender of your vehicle loan. If you owe more on your car than it is worth, you may be allowed to “cram down” your vehicle loan in order to lower the balance you must pay on it.
To cram down a car loan, the debtor’s Chapter 13 plan proposes to pay the lender what the car is worth, not the full amount due on the loan. In other words, if your car is worth $3000 and you owe $5000 on it, your car lender has a secured claim of $3000 and an unsecured claim of $2000. Since an unsecured creditor is paid pennies on the dollar owed (if anything at all) in Chapter 13, you could save up to $2000 on your car loan.
At The Law Office of Diane Anderson, our lawyer has been through a divorce, a bankruptcy, and faced estate planning and probate termination after her mother passed away at a young age. This kind of experience is unmatched by attorneys who have simply guided their clients through each process. Contact us today to schedule a comprehensive consultation.