Did you know that you could restructure your car payment through a Chapter 13 bankruptcy?
Often, people struggling financially feel like they have no options when it comes to a default on an auto loan—the first thing that comes to mind in repossession. However, people who want to keep their transportation to get to work may want to think about bankruptcy.
A Chapter 13 bankruptcy has an automatic stay that stops collections attempts, including repossession. In addition, if your vehicle has already been repossessed, you may be able to get it back if the lender has not sold it.
Once you have filed for a Chapter 13 bankruptcy, the automatic stay will give you an opportunity to work with your lender on lowering the interest rate on your loan, extending payments. Some auto loans are eligible for a “cramdown” in bankruptcy. A “cramdown” occurs when the secured potion of a loan is reduced to pay the replacement value of the car. This means if your car is worth $8,000, but you owe $11,000 on the loan, you may be able to get the $3,000 difference between the value of your vehicle and the debt you owe discharged.
If you are worried about losing your vehicle, a Chapter 13 bankruptcy allows people to keep control of their possessions while working on a repayment plan and restructuring debt. If your financial situation is a problem, contact our Washington DC and Maryland bankruptcy lawyer now for a free consultation.