Chapter 13 Bankruptcy may help you save your vehicle by allowing you to catch up the payment and stop any repossession. In certain cases, the payment may be lowered by paying for the vehicle through the Chapter 13 plan.
Catch up on Past Due Vehicle Payments
Chapter 13 bankruptcy may be an important tool to stop repossession of a needed vehicle, either through catching up on the past due amount or paying for the vehicle as part of the Chapter 13 plan payment. In some cases, this will help with cash flow.
Stop Repossession or Sale
Even if the creditor has already repossessed the vehicle, you may be able to get the vehicle returned by filing Chapter 13 bankruptcy. You must give notice to the creditor of the bankruptcy before the vehicle is sold. You must also provide proof of insurance.
Lower the Amount You Pay on the Loan Down to the Current Value of Your Vehicle
You may be able to lower the amount you pay to the car creditor through the plan down to the value of the vehicle if:
- The vehicle was purchased more than 910 days ago.
- You did not take out the loan to buy the vehicle but just used the vehicle as collateral.
- The vehicle was purchased for business use (even if it was less than 910 days ago).
- The vehicle was purchased for the use of your dependent and not you.
Value is the amount that a retail dealer would charge for a vehicle in the same condition with the same features as yours. Not sure what your vehicle is worth? The courts commonly consider a variety of sources in determining value, such as:
Kelly Blue Book
Edmunds Book Value
Lower the Interest Rate
Chapter 13 bankruptcy may allow you to lower the interest rate to prime plus 1 to 3%. For example, prime if prime is 3%, the vehicle’s interest rate in a Chapter 13 bankruptcy could be reduced to 4-6%. If your interest rate is extremely high, this can be a big saving.
Increase the Length of Time to Pay Back the Loan
Chapter 13 may allow repayment of the loan through the Chapter 13 Plan over a 5 year period. If your balance is small, this may help cash flow.