Losing your vehicle is a total nightmare. The relentless calls from the lender, the terrifying threats of repossession, and the anxiety of waking up to a missing vehicle can quickly precipitate a severe financial crisis.  Losing your transportation makes commuting to work, school, and essential appointments exceedingly difficult. Fortunately, Chapter 13 bankruptcy can step in with a clear plan to catch you up on your payments. The catch? You have to act now to secure this vital protection. Reach out to our experienced Rockland County Chapter 13 Bankruptcy Lawyer for guidance. 

What is Chapter 13 Bankruptcy?

First and foremost, Chapter 13 bankruptcy is a payment plan for folks who have a steady paycheck but need a hand getting out of debt. Think of it like this: instead of having your stuff sold off, Chapter 13 lets you keep your home, car, and other belongings. This is because you will work with the court to set up a three-to-five-year plan to pay some or all of what you owe. Essentially, it is a chance to reorganize your finances and get back on your feet while retaining your property.

How Can Chapter 13 Help You Catch Up on Overdue Car Payments?

Chapter 13 lets you catch up on missed payments over the course of your court-approved plan, typically 3 to 5 years. Instead of needing a huge lump sum right away, you can:

  • Go back to making regular payments, and
  • Pay back those missed payments gradually through your plan

This is way easier to handle than trying to satisfy all of your car arrears right away. Furthermore, the court might let you change the terms of your vehicle loan:

  • Lower Interest: You might get a lower interest rate, saving you money overall.
  • Stretch Out Payments: The loan can span over the life of the Chapter 13 plan, leading to lower monthly bills.
  • The “Cramdown” Trick: If your car is worth less than what is owed, and you meet certain rules, the court can reduce the loan in some cases to the car’s actual value. The remaining debt would then be treated like any other unsecured debt, which is usually paid off at a small percentage or wiped out completely at the end.

When Chapter 13 May Not Be Suitable?

While Chapter 13 will provide a payment plan, it won’t magically make an expensive car affordable. If the payment is still too high, or if your income is shaky, keeping the car might just cause you more stress. In some cases, it’s healthier to let the vehicle go and sort out your other debts.

It should be noted that to even qualify for Chapter 13, you need a steady income to cover living expenses and the monthly payment. If your income is unreliable or too low, this option might not work for you. Finally, if the bank has already repossessed and sold your vehicle at auction, bankruptcy can’t get it back. At that point, it can only help with the leftover balance (“deficiency”), which is why you ned to act fast if you fall into arrears.

If you have fallen behind on car payments, it is in your best interest to contact an attorney at The Lauterbach Law Firm to explore your options. Connect with our team today to set up a consultation.