Bankruptcy can help save your car

I have just returned from a meeting with a prospective client who had his car repossessed yesterday. He has been struggling with his bills for the last six months as a result of a two month period of unemployment. During that time, he fell behind on his car payments and his creditor would not allow him catch the payments up over time. The client needs his car to get to work each day and he came in to get advise on whether we could get is car back

Unfortunately, in Florida, once the car has been repossessed, unless you pay the entire car loan balance it is virtually impossible to get the car back. My client, like many others, was not aware that Chapter 13 bankruptcy is available to help people keep cars and possibly save money on car payments. The bankruptcy case must be filed prior to the vehicle being repossessed for this to be effective. Upon the bankruptcy case being filed, the “Automatic Stay” is in place and prevents all collection efforts including vehicle repossessions. While this will not help my prospective client, Chapter 13 bankruptcy can be used to help others who are struggling with their car payments.

In today’s economy, it is easy to find yourself underwater on your car loan. People are purchasing vehicles with small down payments over longer periods of time (72 months) and vehicles depreciate quickly over the first few years.

The benefit of filing Chapter 13 bankruptcy is the ability to modify your car loan. There are two ways to save money on your car loan. First, the interest rate on your car loan can be reduced to around 5.25%. Second, if certain requirements are met, the car loan balance can be reduced to the current value of your car. For example, if you owe $20,000 on your car loan and the current value of your car is $8,000, then in Chapter 13 you would pay your car creditor $8,000 plus 5.25% interest. To take advantage of the loan balance reduction, the loan must have been taken out more than 910 days before the bankruptcy filing or the vehicle must be used exclusively for business purposes

The ability to modify vehicle loans can create significant savings. In addition, Chapter 13 also deals with other debts such as credit cards, signature loans, medical bills, repossession deficiencies, taxes and past due child support. These other debts may only be paid pennies on the dollar.

If you are struggling with your vehicle payment and other bills, do not wait until your car is repossessed. Please set up a free appointment so we may review your situation and discuss the options available to keep your vehicle and get your other debt under control.