When you purchase a car and establish a loan, that contract comes with certain requirements. If you miss monthly payments, you’ll likely have to pay late fees and other monetary penalties. When too many payments are missed, your vehicle will likely be in danger of being repossessed. In many cases, individuals whose cars are going to be repossessed are struggling financially in other ways as well. If you’re unable to meet monthly debt payments, including your car payments, filing for bankruptcy can halt the repossession of your car and offer long-term debt relief. If you file for Chapter 7 bankruptcy, your car may be at risk of being liquidated by the chapter 7 trustee or being taken by the vehicle lender after your bankruptcy case has concluded. However, you may be able to protect it from the liquidation process by asserting an appropriate vehicle exemption. You may also protect it from being seized by the vehicle lender after your case has concluded by entering into a reaffirmation agreement with the vehicle lender. In a reaffirmation agreement, you and the vehicle lender mutually agree that the vehicle loan will survive the bankruptcy process and that you will continue to be contractually liable on it. Another way to keep your car and stop possible repossession is through Chapter 13 reorganization bankruptcy. With the help of Behm Law Group, Ltd., you can build a strong petition for Chapter 13 bankruptcy in Mankato, MN and the surrounding areas, work through a Chapter 13 repayment plan, and find permanent financial stability.
Chapter 13 bankruptcy is a reorganization process. When you file a Chapter 13 petition, you’ll work with your bankruptcy attorney to create a proposal that takes your debts and structures them into a manageable repayment plan suited to your income and reasonable, necessary living expenses. The proposal is called the Chapter 13 Plan and it lasts three to five years. The Chapter 13 Plan will provide for the discharge of up to 100% of unsecured debts. It can also provide for the payment of your secured debts, including your vehicle loan, under terms that are much more favorable to you and which are designed or suited to your unique budget circumstances.
Because your car loan can be included in your Chapter 13 repayment plan, you will be able to keep your vehicle since you’ll still be repaying the debt; you’ll just be repaying the debt under different terms. This aspect of Chapter 13 stops vehicle repossession, but repossession is also halted immediately when you file because of the automatic stay injunctive mandates of 11 U.S.C. § 362. The automatic stay prevents creditors from starting or continuing their collection activities, including repossession. Even if the vehicle creditor has already taken your car (as long as they haven’t sold it), they may have to return it to you when your bankruptcy case is filed and the mandates of the automatic stay take effect.
When You File
- The automatic stay is in effect
- Your Chapter 13 repayment plan proposal is submitted to the bankruptcy court
- All your creditors will be able to review your Chapter 13 Plan
- Your car lender may return your vehicle if it has been repossessed
- The case is resolved through the bankruptcy court and there is finality when your case is completed
- You start making monthly plan payments to the Chapter 13 trustee within thirty (30) days after your bankruptcy case has been filed
- You can catch up on any missed car payments
- After the three- to five-year plan is finished, the debt on your car is completely paid off
Chapter 13 reorganization bankruptcy can also help you catch up on many other missed payments, such as missed mortgage payments, and it can help you pay off other secured debts in full under more favorable terms. Chapter 13 can significantly help you resolve your financial problems in a short, three-to-five year period. Outside of Chapter 13 bankruptcy, you may have to repay missed payments in a lump sum instead of being able to spread the payments over a three-to-five year repayment period.