What Happens When My Car is in Bankruptcy?
Our prospective clients often ask about what happens to their car in bankruptcy. Relax: the general rule is that you can keep your car as long as you can afford to continue making any car payments. The Trustee will not make you sell your car.
Let’s go through a few common scenarios and discuss in more detail:
Scenario 1: You are completely caught up on your car payments, or you own your car free and clear, but you have too much credit card debt, medical debt, or other unsecured debts that you just cannot afford to pay. You are considering bankruptcy to handle your debts, but you want to keep your car and you can afford to continue to pay for it.In this situation, whether you file Chapter 7 or Chapter 13, you may keep your car. You will have to continue to make the payment, if any.
Scenario 2: You are several months past due on your car payment, but you want to keep your car. Perhaps you have been trying to get a workout or refinance, but the lender is not working with you. Facing repossession soon, you wonder if bankruptcy will help you save your car. You may also have too much credit card or other unsecured debt.
In Chapter 13, if you have owned your car for at least 910 days, often you can dramatically reduce your car payment through your Chapter 13 plan. Especially if you are paying a high interest rate or if you owe more on your car than it would cost to replace it.
Even if you have purchased your car more recently, Chapter 13 can still be used to propose a plan to catch up on and pay off your car. Your bankruptcy lawyer can help you calculate what your car payment would be in a Chapter 13 bankruptcy. If you cannot afford your car payment, you can choose to surrender your car in either Chapter 13 or Chapter 7 and have any remaining balance discharged. Consult your attorney.
These issues can be complex. A capable bankruptcy attorney in Corona can educate you about your options, review the details of your particular car loan, assist you in weighing your options, and help you implement the option that is best for you. Call for a consultation.