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Keeping your car in Chapter 13 bankruptcy

If you are thinking about filing Chapter 13 bankruptcy to manage your debt, you probably have a lot of concerns. For example, what will happen to your car if you file? Bankruptcy can be a scary thought, and you might be worried about losing your assets. Generally, you can keep your car in Chapter 13, but there are exceptions. 

Keeping your car depends on the amount of equity you have in your vehicle and the cost of your payment. Learn more about how you can potentially keep your car through a bankruptcy filing.

Equity and expenses

A Chapter 13 repayment plan intends to pay your creditors an equal amount to your non-exempt assets. This becomes a problem if you have a significant amount of non-exempt equity related to your vehicle. Your car payment must also be reasonable. You could potentially run into problems if you have a large payment on a luxury car. However, these issues should not automatically cause you to lose your car. 

Automatic stay and cram down

When you file under Chapter 13, you prevent creditors from making collection efforts. This means your lender will be unable to repossess your vehicle. This is the automatic stay. If your car was already repossessed before you had the chance to file for Chapter 13 bankruptcy, you might be able to get it back.

Also, your car loan might be more expensive than the actual value of your car. In this case, you might be able to get a reduced loan. This is known as a cramdown. 

Catching up on your loan or lease

According to Bankrate, Chapter 13 can help you catch up on the amount you owe. This is because of the repayment plan that is central to this filing, allowing you to make up your payments over the course of three to five years. When handled correctly, you might be able to save your car by filing for Chapter 13 bankruptcy. 

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