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If you are behind on your car payments or vehicle loan a Chapter 13 bankruptcy can help. As soon as the bankruptcy case is filed the automatic stay goes into effect stopping any and all collection actions including repossession of vehicles. A Chapter 13 bankruptcy case can also decrease the balance owed on a vehicle loan and reduce the percentage rate on the loan if the vehicle was purchased 910 days prior to the date the case was filed.
Decrease the Balance Owed and Decrease the Percentage Rate
Example #1:
- Purchased Chevy Silverado for $30,000 in September 2008
- Loan is for 60 months with approximately 9% interest
- Monthly payment is approx. $600 a month before filing Chapter 13
- File Chapter 13 bankruptcy today, GMC Sierra is only worth $10,000 and you still owe $18,000 on the loan
- Chapter 13 plan you will pay the fair market value of the vehicle $10,000 over the length of the plan at approx. 4.75% interest
- If the plan is 60 months, you will pay approximately $170 a month in the plan saving approximately $8,000
Catch Up on Car Payments
Example #2:
- Monthly payment is $300 per month
- Behind 4 months, a total of $1,200
- In a 36 month Chapter 13 plan you would pay approx. $33 a month to catch up on the missed car payments, plus make the normal payment
- In a 60 month Chapter 13 plan you would pay approx.. $20 a month to catch up on the missed car payments, plus make the normal payment
Example #1 is about cramming down the value of the vehicle to the fair market value. If the fair market value of your vehicle is far less than what you owe, then you could save a lot of money by filing Chapter 13. Again, you only have to pay the fair market value of the vehicle if the vehicle was purchased 910 days prior to the date the case was filed. That is about two and a half years ago.
Example #2 is about just saving a car from repossession and paying the missed vehicle payments over three or five years depending upon the length of the Chapter 13 plan.
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