Can I save my car by filing bankruptcy? We hear this question a lot from consumers who are behind on their car payments. It is easy to get behind on car loan payments. A decrease in income, unemployment, an accident, or an illness can cause you to miss one or two car payments. Unfortunately, once you miss a couple of payments, it is difficult to catch up without help.
Filing bankruptcy stops repossession. You might be able to save your car and get rid of other debts by filing for bankruptcy relief. If you are facing a repossession, contact Allegiant Law Group by calling 602-562-1000 for a free consultation with an experienced Phoenix bankruptcy lawyer.
How Does Filing Bankruptcy Stop Repossession?
The automatic stay provisions of the Bankruptcy Code prohibit a creditor from taking any action to collect a debt after a bankruptcy case is filed. Therefore, if you file a Chapter 7 bankruptcy or Chapter 13 bankruptcy petition, the lender must get approval from the bankruptcy court to repossess your vehicle.
However, the bankruptcy stay does not forgive the debt. You must make arrangements to pay the debt to keep your car. A Chapter 13 repayment plan can help.
Filing Chapter 13 to Save Your Car
Through your Chapter 13 plan, you can pay your car loan over three to five years. In some cases, you can reduce the interest rate charged for the car loan. If you meet certain requirements, you might even be able to reduce the amount you owe on the secured portion of the loan. In other words, you might be able to reduce the amount you must pay to keep your car in a Chapter 13 case. For someone who owes more on their car loan than the car is worth, the savings could be substantial.
Can I Get My Car Back if I File Chapter 13?
Here is how car repossession works. Once your car is repossessed, you have a very short window in which you can file Chapter 13 and get your car back. If the car has not been sold, you have just 10 days after repossession to file a Chapter 13 to save your vehicle.
However, filing Chapter 13 to save a car is not always the best plan. A car may not be worth the expense and other consequences of filing a Chapter 13 bankruptcy case. Our Phoenix Chapter 13 bankruptcy attorney will analyze your entire financial situation, explain your options, and discuss the pros and cons of filing bankruptcy to help you decide if Chapter 13 is right for you.
Filing Chapter 7 and Repossession
Filing a Chapter 7 petition also stops repossession, but your options for keeping your car are limited. Chapter 7 is not a repayment plan, so you would need to make arrangements with the lender to catch up on your car payments or pay the loan in full. In some cases, you might be able to redeem your car for less than you owe, but it would require a large lump sum payment.
If you do not want to keep your car, filing Chapter 7 may be the best option for debt relief. You can get rid of your car payments without worrying about owing a deficiency if the sale of the car does not pay the loan in full. You can also get rid of unsecured debts, including credit card bills and medical debts, so that you can get back on track financially.
Contact Our Arizona Bankruptcy Attorneys for Help
Bankruptcy can protect other property from repossession, including boats, furniture, personal property, trucks, and motorcycles.
If you are unsure what to do about your debt problem, the Arizona bankruptcy attorneys of Allegiant Law Group can help.
Schedule a free consultation with a Phoenix bankruptcy attorney by calling 602-562-1000.