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.
No matter which way you look at it, filing bankruptcy is a legal process. It involves following the requirements from the bankruptcy law as established by our legislature, and if the requirements are not met there are consequences. Many people may assume that if you make a mistake during your personal bankruptcy the court will give you a bit of leeway and help you fix it, but that is not always the case. There are mistakes that debtors can make that can lead to automatic dismissal of the bankruptcy case and in some rare cases even limit when the debtor can file again. Here are some ways to make sure that doesn’t happen to you:
1. Be honest
Declaring bankruptcy may be a sensitive subject for you, but no matter how worried you are don’t hide anything from your attorney or the court. You will need to be completely upfront with your attorney about your entire financial situation from day one. If you are worried about losing any of your property the way to keep it safe is not by hiding it from your attorney, but by being forthright so that your attorney can find a way to protect it. If at any time during your case the bankruptcy court believes you may have committed fraud they can dismiss your case, this is just one of the reasons honesty is vital.
2. Attend your hearing
Everyone who files bankruptcy is required to attend a court hearing known as the “meeting of creditors”. Although all of your creditors will be notified of the date and time of the hearing it is rare that any of them show up. You will receive sufficient notice of your hearing through the US mail and should make whatever plans necessary in order to attend. Your bankruptcy lawyer can prepare you with questions you may be asked at this hearing, but it is nothing to be intimidated of. The hearing will last anywhere from 8-15 minutes and will consist of questions regarding your case. If you miss this hearing the bankruptcy court could dismiss your case. If you think you will be unable to attend notify your attorney immediately to see if you can request a continuance from the court.
3. Follow directions
This may seem like a simple task, but it is one that can really save you a lot of headaches. Listen to your bankruptcy attorney and the bankruptcy judge very carefully and be sure to do whatever they say. If your bankruptcy attorney needs paperwork from you then make sure you get it to them in a timely manner. If the bankruptcy court needs you to take a required debtor education course before your hearing, make sure you do that so there will be no reason for the court to dismiss or continue your case to a later date.
By using these simple tools you can put your best foot forward and be confident that instead of having your bankruptcy dismissed, it will be completed and successful and you will be on your way to a debt free life.
For many Americans, the first few months of the year are happy ones because of two words: tax refund. Tax refunds can sometimes be large enough for people to catch up on debts that are troubling them, put down payments on new vehicles, or pay off all of the credit cards they racked up during the holidays. For someone in the middle of a bankruptcy getting a tax refund can be a bit tricky. Legally, a tax refund during bankruptcy can be taken by the bankruptcy court in order to help pay off creditors, but in some cases there are ways around that.
For instance, you can choose to receive your refund 1 of 2 ways: by mail or by direct deposit. If you choose to have it mailed then you should know that it can be intercepted before it gets to you and held until after the bankruptcy court hearing in order to find out what the bankruptcy judge wants to do with it. If you choose to have your refund direct deposited into your bank account you should be aware that if the refund is deposited into a bank to which you owe money your accounts could be frozen until after your bankruptcy hearing. Discuss this decision with your bankruptcy lawyer to ensure the best payment option for you.
Once you have your refund you should document exactly how you spend it in case the court asks. The best way to spend your tax refund while you are in a Chapter 7 or Chapter 13 bankruptcy is on necessary items like rent, utilities, vehicle payments, and mandatory home repairs. By doing this you will show the court that you did not spend the money irresponsibly and they will have no reason to try to get the money back from you. On the other hand, if you spend your refund on items like new TV’s, Ipads, phones, and other superfluous items then the court may have reason to say that you spent the money irresponsibly and could ask you to repay the money that you spent. Again, keep a log of everything you spend your refund on so that you can show the court if they request to see it.
As you can see, tax refunds and personal bankruptcy are tricky so you should notify your attorney immediately when you know the amount of your refund, especially if it is more than $5,000. In most cases your bankruptcy lawyer will do whatever they can to keep your refund safe and in your hands, but you should be aware of the other outcome. You should also know that you cannot give your tax refund to friends and/or family for “safe keeping” until your bankruptcy is over. That is considered fraud and your entire case could be thrown out because of it. The safe bet is to be honest with your attorney about your tax refund so that it can stay with you and not be at risk of being taken by the court.