If you have a car loan and want to keep your car in bankruptcy, you will have to deal with your existing car loan. There are different ways to deal with a car loan in bankruptcy. You can reaffirm your existing loan and continuing to make payments to your lender, just as if you had never filed bankruptcy. In some cases, your lawyer may advise you of the possibility of redeeming (repurchasing) the car for its fair market value. Certain companies offer redemptions, while you are in bankruptcy in San Diego, to help you redeem your car and pay off the existing loan against the car.
When you file bankruptcy car loan debt is treated different depending upon whether you file under Chapter 7 Versus Chapter 13. When you file under Chapter 7, any car loans that you have will generally be treated in the same manner as if you had never filed for bankruptcy. When you file under Chapter 13, you will elect to either repay the loan and keep the car, or stop paying on the loan and surrender the car to your lender. You will make this election through a specific provision in your Chapter 13 plan.
In order to keep your car loan in a Chapter 7 bankruptcy, at the time that you file bankruptcy you must state your intention to retain the car and reaffirm the loan, and then you must timely sign a reaffirmation agreement that reaffirms the terms of the loan.
In addition, you will have to become current on the loan, either by repaying the missed payments to your lender or negotiating a reaffirmation agreement with your lender that brings the loan current.
As long as you become current and stay current on payments, and you sign a reaffirmation agreement agreeing to repay the car loan, you will get to keep your car when you file bankruptcy.
If you are behind on your payments, or if you fall behind, whether before or after signing a reaffirmation agreement, your lender can repossess and sell your car. There is a bankruptcy stay created by virtue of your bankruptcy filing but your lender can easily obtain relief from the bankruptcy stay in order to repossess and sell your car if you are behind on your payments.
If you no longer want to keep your car when you file bankruptcy, you can simply stop making your car loan payments and your loan balance will be completely eliminated in your Chapter 7 filing, assuming that there are no other factors preventing you from discharging the debt. Before making the assumption that your car loan debt will be eliminated, you must consult with an attorney.
In a Chapter 13 bankruptcy, you will prepare and file a Chapter 13 plan that will provide for the treatment of your car loans.
If you want to keep a particular car, then your Chapter 13 plan will propose to repay either the current balance or the retail value of the vehicle over a 3-5 year period. If the loan was taken out in the last 2 1/2 years, you will have to repay the full balance of the loan. If the loan is older than 2 1/2 years, you can pay on the retail value. Keep in mind that “retail” value is usually significantly higher than what you would be able to sell your vehicle for.
If you want to let the car go, then you simply state your intention to do so in your Chapter 13 plan and you surrender the vehicle to your lender. Assuming there are no issues precluding a discharge of the car loan balance, then the entire loan balance will be eliminated by your Chapter 13 discharge. As with Chapter 7 cases, prior to assuming that your car debt will be eliminated in a Chapter 13, you should discuss your situation in detail with an attorney.