Something that is frequently contemplated by anyone who might be considering a bankruptcy filing is the extent to which the bankruptcy will impact their existing car loan or lease. You might wonder whether you can preserve the loan throughout the bankruptcy discharge process, or whether arrears on the vehicle loan can be caught up or paid off through the bankruptcy. In brief, the answer is that yes, you can certainly preserve your vehicle and similarly, you may also be able to either catch up or pay off your car loan, depending on the chapter of bankruptcy that you file.
To expand up on this, we must now analyze how each of these things procedurally occurs across various chapters of bankruptcy. To begin with, a vehicle loan can almost always be preserved throughout the process of bankruptcy, regardless of which chapter is being filed. However, the chapter will typically dictate the method through which the loan is ultimately kept intact. In a Chapter 7 bankruptcy filing, payments on vehicle loans can continue throughout the process of filing with little to no change to the way in which they would have been paid outside of bankruptcy. The most significant distinction here is that a lender may ask someone who has filed Chapter 7 to “reaffirm” their loan, which essentially means that the loan would be excluded from the discharge.
Conversely, in a Chapter 13 bankruptcy, the process of reaffirmation does not exist. For those who wish to continue with their existing loan throughout the Chapter 13 process, they would do so by indicating this in the plan that accompanies their Chapter 13 filing. Chapter 13 offers another intriguing possibility here, as not only can arrears on a vehicle loan be repaid through the plan, but so to can the loan itself be paid off through the Chapter 13 plan.
If you wish to pursue this option, the existing structure of the loan would effectively be set aside, and the lifetime of the payments would now be based on the total length of the plan. Thus, if you had a five-year plan, the car could then be paid off over five years through payments made by the bankruptcy trustee out of the funds that you are paying to them. The interest paid through this method would usually be based upon the existing market interest rate (plus a risk adjustment) and the payments would be made in equal installments in the same way that they would be outside of bankruptcy.
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There are a world of possibilities that exist in bankruptcy, both with respect to eliminating your debts and also with regard to how you may protect your assets while doing so. In speaking with an attorney at Lifeback, you will be provided with ample opportunity to explore how the bankruptcy process can be tailored to best protect your assets, and meet your needs. So, when the time is right, or when you are ready, please don’t hesitate to reach out to Minnesota’s most kind and helpful bankruptcy law firm by going now to www.lifebacklaw.com.
