A concern for many people needing to file bankruptcy is what do I do about a vehicle. There are more options than you might think. I previously wrote about vehicle options in chapter 7. This blog will focus on vehicle options in chapter 13.
First, I will discuss cases where the Debtor's vehicle has a vehicle loan. A vehicle loan is a secured debt. When you file chapter 13, you must file a chapter 13 plan advising the court and the creditor of your intentions regarding the debt secured by the vehicle. The options include pay direct, pay in plan with or without curing arrears, value, or surrender.
If you choose to pay the vehicle loan direct, you will continue to make the payments as you were before you filed bankruptcy directly to the creditor. This is a good option for people that have a decent interest rate and do not owe more than the vehicle's value. You must be current on the payments to choose this option. If you are not current on the payments, you must pay the loan through the chapter 13 plan.
There are a few reasons people choose to pay a vehicle loan in the chapter 13 plan. Paying the vehicle loan in the plan means the payment will be included in the chapter 13 payment made to the trustee. If you have a high interest rate, it may benefit you to pay the plan because the court provides the interest rate to be paid in the plan, which is called the till rate. This rate is prime plus 2 percent. Currently, the prime interest rate is 7 percent.
If you are behind in your payments on your vehicle loan, you are limited to either curing the arrears and paying the ongoing payments in the plan or surrendering the vehicle to the creditor. The payment will be recalculated to pay the till interest rate on the balance of the loan over the life of your chapter 13 plan.
Finally, you have the option of surrendering the vehicle back to the creditor in a chapter 13 as well. There are programs that we can refer you to that can get you a new vehicle even if you have to file chapter 13. This is usually a good option for someone that has a vehicle that needs repairs it is just not feasible to keep paying on the vehicle.
If you are considering bankruptcy but are worried about what will happen with your vehicle, contact our office and we can help you determine the best option for your circumstance. The attorneys at Holland Law Group will advise you of your options with regard to your vehicle and help you determine what the best course of action is for your particular circumstance. All cases are different and if you are considering a bankruptcy, you need a knowledgeable attorney to get you the best result. Our goal at the Holland Law Group is to get you the best fresh start possible.