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How Chapter 13 can help you keep your car

On Behalf of | May 7, 2017 | Chapter 13

If you are considering filing for bankruptcy, you may be dealing with enormous stress. For many people in the Alexandria, LA, area, the ability to continue working and functioning ranks among top concerns.

Commuting to work, taking children to and from school, shopping for groceries – for most people, their car is an essential tool that allows them access to basic life necessities. The good news is that a Chapter 13 repayment-based bankruptcy generally lets you keep your car, unlike a Chapter 7, which requires you to sell off a non-exempt vehicle.

Courts understand you need to pay for your car

When formulating a repayment plan, the law expects you to put all of your disposable income towards your monthly repayments. Courts consider income disposable after accounting for and deducting basic living expenses. Car payments and maintenance fall into this category. The only exception arises when a debtor spends an unusually high amount of money on a luxury model.

Equity can present a problem but rarely does

Another situation in which your car ownership may affect your repayment plan is when you have a large amount of equity in your car, which could raise the amount of your monthly payment. Most people do not need to worry about this. Even if you bought an expensive car, depreciation combined with the way car loans are structured typically brings down the value of any equity quite fast.

Filing for bankruptcy can take care of arrears and potential repossession

If your car loans form part of the debt you are falling behind on, you might include them in your Chapter 13 repayment plan. As part of your monthly Chapter 13 payment, you will make your current loan payment as well as an installment of your arrears.

Once you file your bankruptcy petition, the automatic stay will stop your lender from repossessing your car. Even if you lost your car to repossession before you filed, during a short time period your lawyer may be able to get it back for you. If your car payments loom large among your financial worries, speaking with a knowledgeable bankruptcy attorney can clarify your options and identify the best solutions for you.