For some people a vehicle is no more than a means to get from here to there, for others a vehicle is a very meaningful posession and almost a part of the family. For most, a vehicle is also a large monthly expense, second only to rent or mortgage payment. In almost ever case, losing a car to repossession would have a major impact on a person’s life. A question I frequently hear is “Will bankruptcy save my car from repossession?” The answer in most cases is yes.
The type of loan that most of us have on our vehicle is a purchase money security interest loan. That means that the money that was loaned to you was used directly to purchase the vehicle. Repayment of the loan is usually with a fixed interest rate for as long as 72 months. A second type of car loan is called a title loan. This loan requires that you have a clear title (no other loans) on your vehicle and is normally a short term loan with a very high interest rate. Filing a bankruptcy can save the car regardless of the type of loan.
Chapter 13 Bankruptcy is used to refinance your car at the bankruptcy interest rate (currently 5.25%) for up to five years. This includes any amount that you might be behind on with your loan. Your car payment will be part of your Chapter 13 bankruptcy payment. You will no longer pay the lender directly for the loan. As long as you make all of your required bankruptcy payments your car will be safe from repossession. In addition, the lender will no longer be allowed to contact you (ever again) about the loan.
Our vehicles (cars, trucks, motorcycles) are very important to us for a large range of reasons. Filing a Chapter 13 bankruptcy is an effective means of preventing the lender from repossession the vehicle.