Can Bankruptcy Help When You’re Behind on Your Car Payments?
When money is tight, and you are considering bankruptcy, you have often been behind on payments for months. You have run up credit card debt, and missed payments on your car and mortgage. And now, perhaps your lender is threatening to repossess your car. What are your options in Chapter 13bankruptcy?
Chapter 13 Allows Debtors to Make Past Due Payments Over Time
In Chapter 13, unlike Chapter 7 bankruptcy, you can keep your car without needing to be current on your payments. However, in order to keep your car in Chapter 13 bankruptcy, you need to agree to pay off your missed payments during the course of your bankruptcy plan.
For many people, these payments can be made at a reasonable rate, and this can be done so that you can still live comfortably while keeping your vehicle. The bankruptcy courts understand that a car is important to any lifestyle in Arizona, and is more of a necessity than a luxury.
The Cram Down Option
In addition to providing help for past due car payments, chapter 13 bankruptcy may also be able to reduce the balance of your car loan. Debtors who are underwater on their cars are eligible to reduce their loan balance to the car’s current value depending on the timing of the purchase of the car. If you purchased it within 910 days of filing for bankruptcy, the cram down option isn’t available unless the car was purchased for business use.
The Surrender Option
Additionally, you always have the option of surrendering your vehicle during your bankruptcy or before bankruptcy. If you do this, you can greatly reduce your payments every month.
It may also be possible to surrender your vehicle and purchase a new one with lower monthly payments. This decision is one that must be approved by the trustee. However, if the decision is a frugal one, and you need a vehicle to get to work or otherwise stay mobile, the trustee may accept this plan.
If you would like to learn more about your options in Chapter 13 bankruptcy, contact a qualified and experienced attorney to discuss your case.
Erik Clark is one of the leading bankruptcy attorneys in Southern California who has had the privilege of representing thousands of clients in chapter 7 and chapter 13 bankruptcy cases in the Los Angeles area. Erik has served as the past President of the National Consumer Bankruptcy Litigation Center (NCBLC) and the American Consumer Bankruptcy College (ACBC). His firm, Borowitz & Clark, is committed to using bankruptcy law as a tool for social justice and was one of the first consumer law firms to join the Law Firm Antiracism Alliance.