If you have an existing car loan when you file for bankruptcy, there are five options for you. In most cases, you might even be able to hold on to your car. It depends on how far through you are with the payment, and the worth of the car in the years that you have been using it. As always, the outcome will be slightly different for chapter 7 and 13, but the point is, for you to continue using your car, you need to take a few steps. Learn the process of car loans in bankruptcy.
Car loans are based on similar principles as that of home mortgages. The lender agrees to give a loan that is based on a lien that they hold on the car. So, when you pay out the loan amount entirely, you get full ownership of the vehicle.
Car Loans In Bankruptcy
If you are unable to pay out the entire loan and file for bankruptcy, then there are 5 ways in which it will normally go.
- The vehicle will be taken away- In chapter 7 cases, there is a chance the lender will repossess the car.
- Reaffirm the car loan with the lender/loan provider- After a court-approved reaffirmation agreement is signed, the lender can enforce a certain percentage of the car loan be paid.
- Keep the car and continue to pay loans- This is how it will turn out in most of the cases. You will keep the car and make payments as usual.
- Redeem the car loan with a different lender.
- Negotiate new terms with the lender.
Under chapter 13, your car loan will not get written off. Depending on how old the car loan is and the car's current market value, a new payment plan will be created. The interest rates could be reduced for the loan, so there may be a smaller amount to pay every month.
If you are having trouble with your car loan payments or think you are at risk of repossession, contact a bankruptcy lawyer in Sacramento.