Did you know that each year thousands of Americans file Chapter 13 bankruptcy in order to save their vehicle from becoming repossessed? It’s true! Unlike what you may be used to hearing, bankruptcy can be used for much more than erasing credit card debt. By using a Chapter 13 bankruptcy an individual can stop the repossession process completely and catch up on their past due payments. Here’s how filing a Chapter 13 bankruptcy can save your car from the stress filled process of repossession:
1. Bankruptcy stay of protection
On the day that your bankruptcy case is filed, whether it be a Chapter 7 or Chapter 13, the bankruptcy court issues a what is known as an “automatic stay.” Put simply an automatic stay acts as an umbrella of protection over the debtor that prohibits any attempt to collect a debt against them including, but not limited to: lawsuits, phone calls, letters, foreclosure, and repossession. If the repossession process has already started then the automatic stay of protection will bring it to a halt, and if the process has not begun then the stay will not allow it to start.
A typical Chapter 13 bankruptcy involves a 3-5 year repayment plan where the debtor is allowed to payback a percentage of their unsecured debt. Since a vehicle loan is considered a secured debt a Chapter 13 case designed to save a car from repossession will involve a repayment plan that will ultimately catch the debtor up on all of their past payments while they are continuing to make current payments outside of the Chapter 13 repayment plan. The repayment plan will be calculated and agreed upon by the debtor, the debtor’s attorney, as well as the bankruptcy trustee who oversees the entire case.
3. Catching up
By using the repayment process the debtor will be debt free and completely current with their vehicle payments when the Chapter 13 bankruptcy is complete. By allowing the debtor 3-5 years to complete this process the bankruptcy payments each month can be made small and realistic to the debtor’s budget. You may be thinking that a lot can happen during that 3-5 year span, but with the automatic stay the debtor is protected from the day the case is filed to the day that the case is completed.
Vehicle repossession can turn a person’s life upside down. The need for a reliable means of transportation is important to dozens of things including keeping or looking for a job, getting kids to and from school, and making important appointments, etc. In some cities in America not having a vehicle is just not an option. If you are falling behind on your car payments or are already receiving calls and threats from repossession companies then think about how a Chapter 13 bankruptcy could help you today! Call a local bankruptcy attorney and request a free consultation to discuss whether or not a Chapter 13 bankruptcy is right for you and your financial situation.