Chapter 13 bankruptcy allows you to catch up on previous dues and make arrangements to clear your secured, priority and unsecured debts through a repayment plan. Unlike Chapter 7, you can keep all your property in Chapter 13 bankruptcy if you pay your unsecured creditors the amount of non-exempt property you are keeping. This chapter of bankruptcy, say lawyers of Los Angeles based bankruptcy law firm Recovery Law Group, can help you catch up on mortgage and car loan payments and also help in reducing the amount owed in the latter case.
Sometimes, even Chapter 13 bankruptcy might not help you with keeping your vehicle; and it might be wise to let go, especially if the non-exempt equity in the car is too much. The bankruptcy exemptions allow you a certain amount of equity in a vehicle. In case you have two vehicles or have a vehicle with exceptionally high car payments (luxury vehicle), then keeping it during bankruptcy would be foolhardy. If you wish to know more about keeping your vehicle during bankruptcy, you can consult with expert bankruptcy lawyers at 888-297-6023.
Can Chapter 13 bankruptcy help with your vehicle?
Chapter 13 helps bankruptcy filers who wish to keep their property, the primary benefit is automatic stay which prevents repossession of the vehicle in case you have fallen behind on payments. When you file for bankruptcy, the automatic stay provision stops all collection actions including foreclosure and repossession. What’s more, if a lender has already repossessed your vehicle, you might get it back if you file for bankruptcy!
Chapter 13 also offers you a chance to catch up on previous payments. You can be in the good books of the creditor if you pay for the arrearage (the amount you are behind on car loan) along with regular car loan payments through the Chapter 13 repayment plan. If you continue making these payments during the course of your bankruptcy chapter, the lender cannot repossess your car.
You might even reduce your car loan by cramdown. This facility is available for vehicles purchased 2.5 years prior to a bankruptcy filing. If the value of the vehicle is less than the amount due, you might be able to get the loan amount reduced in the case of Chapter 13 bankruptcy Los Angeles. Any remaining amount is treated as an unsecured debt; paid using your disposable income (the amount left after taking care of your monthly expenses and paying secured and priority debt). Unsecured debts are discharged at the end of the repayment plan.
What to do if you wish to keep your vehicle?
Chapter 13 allows you to keep the non-exempt property as long as your creditors are getting adequately compensated through the repayment plan. Apart from your monthly expenses including any mortgage or car loan payments, the disposable income will be used to pay off the creditors of your unsecured debts through a 3 to a 5-year repayment plan. This shall include the value of the non-exempt property which you intend to keep. Any creditor who thinks they are not getting their due can file an objection to the plan, which may derail the entire bankruptcy process.
Keeping a car which, you cannot afford is being foolish and stubborn. Chapter 13 lets you surrender any vehicle on which you cannot make timely payments and that will require huge loads of money for repair. You will reduce the debt burden by letting go of such a vehicle. The court also does not look kindly to people using funds in a misappropriate manner, paying for excessively high car payments instead of paying the creditors’ their dues.