It can be difficult to decide what to do with your vehicle loan if you have filed for bankruptcy. What you can do with your loan? How easy it is to keep your car or get rid of your car? What type of bankruptcy you want to file? These important questions can determine what will happen with your car loan. In today’s blog, bankruptcy attorneys Groce & DeArmon explain what happens to your car loan in Chapter 7 and Chapter 13 bankruptcy.
Car Loans in Chapter 13 Bankruptcy
If you are facing Chapter 13 bankruptcy, there are a few options for catching up on car loan payments. Here are a few of your options:
If you took your car loan out over two and a half years ago, you can reduce the principal of the car loan by finding the current value of the car and reducing the principal to match that value.
In many cases under Chapter 13 bankruptcy, you can reduce your car loan to a more reasonable rate by 4-6 percent.
Catch Up on Arrears
Under Chapter 13 bankruptcy, if you are behind on car loan payments you can tell your lender to accept small monthly payments to catch up, then resume making regular payments later on. This option is especially helpful for those facing repossession.
Car Loans in Chapter 7 Bankruptcy
If you are filing for Chapter 7 bankruptcy, here is what you can do with your car loan:
Surrender the Car
If you wish to get rid of your car, under Chapter 7 bankruptcy you can surrender your car to the bank. If you decide to give up your car you will not have to pay the remaining balance.
With retain-and-pay under Chapter 7 bankruptcy, your car loan will be discharged but you will be able to keep your car and pay the remaining debt without being personally liable. This means that the creditor can not come back to you for any unpaid debts and you are no longer legally required to pay the remaining debt. Once you have paid off the loan you own the car. This option is hard to come by because most lenders will demand a reaffirmation agreement instead.
Many lenders will not want you to discharge your personal obligation to a loan. In this case, they might demand a reaffirmation or a legal process where you will have to renew your commitment to paying the loan and will have personal liability.
Bankruptcy Attorneys Groce & DeArmon
If you are considering Chapter 7 or Chapter 13 bankruptcy and are trying to decide what to do with your car loan, contact the trusted bankruptcy attorneys at Groce & DeArmon. With 30 years of experience, we can help you decide if bankruptcy is right for you. If you are interested in Chapter 7 or Chapter 13 bankruptcy you can start by scheduling a free consultation. Call us at 417-862-3706 or visit us online to learn more.