One of the major concern people have when they file for bankruptcy is what will happen to their car and house – will they be safe from collection actions or not? Lawyers of Dallas based bankruptcy law firm Recovery Law Group, inform that when an individual files for bankruptcy, whether Chapter 7 or Chapter 13, the court orders for an automatic stay which prevents any collection attempts including foreclosure, repossession and threatening phone calls. However, any criminal proceedings like visitation proceedings or child custody and even some eviction proceedings continue as per the state law.
Chapter 13 automatic stay and car repossession
The automatic stay is enforced when you file for bankruptcy. It can help with car repossession, depending on what the current situation is:
- Your lender has already repossessed your car
In case the lender repossessed your car just a few days before you filed for Chapter 13 bankruptcy, there are chances you might get it back. Your Chapter 13 repayment plan needs to show that you can make payments on not just past arrears but also continue making regular monthly payments towards your car loan. In case you face a similar situation, consult with bankruptcy lawyers at 888-297-6023.
- You have the car when you file for bankruptcy
If your car is not repossessed yet, the automatic stay can prevent it to take place in the near future (till your Chapter 13 repayment plan is approved by the bankruptcy judge). If you include any missed car loan payments in the repayment plan and stay current on your further payments, the lender cannot repossess your vehicle. However, you need to make payments from the time you file for bankruptcy till the proposed repayment plan is approved to have “adequate protection” against any repossession action. This amount is generally equal to your car payment.
Automatic stay might not protect you if you file for Chapter 13 bankruptcy shortly after a previously filed Chapter 13 bankruptcy case was dismissed by the court. In case you do so, the automatic stay lasts only for 30 days unless you file and win the motion for additional time to prevent repossession. In case you reject a personal property lease (for car, any equipment, etc.), the automatic stay will lift on the rejection date. Alternately, a creditor can ask for the lifting of automatic stay if they can prove that they will lose money in case you stop making payments on your car loan.
Other benefits of Chapter 13 bankruptcy
Inability to pay dues often causes people to accumulate huge debts, resulting in a situation where bankruptcy is the only answer. Chapter 13 can help you manage your secured debts. In case your debt is more than what the vehicle is worth, you might be able to get a car cramdown. This is a process through which you can reduce the loan balance on the property (car, boat, storage building, vacation home, etc.) to the current value if it meets certain conditions. Additionally, you could lower the interest rate so that the payments are more affordable. Any amount which remains is treated as unsecured debt and is paid after secured and priority debts. Cramdown can be availed on several secured loans except for the mortgage on your principal residence or any recently purchased item.
You cannot use cramdown on property purchased recently. Vehicle loan taken 910 days prior to bankruptcy filing will not be reduced using this method. However, you can cramdown car title loans which were not used to purchase vehicle i.e. you used the car as collateral to finance another purchase, even if it was taken within the 910-day period. Cramdown cannot help you reduce the balance and/or interest rate in case of a dismissed Chapter 13 bankruptcy Dallas. In such a case, the loan regains its original terms and the creditor has rights to repossess the property if you are unable to pay the amount due at the interest rate you agreed to.