While some Americans are able to get by without a vehicle, having reliable transportation is necessary to most. Whether it is a means to get to work, or to school, or to take the kids to soccer practice, a vehicle is an important part of daily life. So, it is no wonder that one of the first questions my bankruptcy clients ask is, "Can I keep my vehicle during a Chapter 13 bankruptcy?" The answer is yes!
Keeping your vehicle during a Chapter 13 bankruptcy case starts with a few questions. First, when did you purchase your vehicle? If your purchase was within 910 days of your bankruptcy filing, the Bankruptcy Code requires that you pay the entire balance of the loan, usually within the three to five years. If the vehicle was purchased more than 910 days before the bankruptcy filing, the Bankruptcy Code allows us to lower the balance of the loan based on the vehicle's worth. This is known as a "cram down".
The second issue is: how much is owed on the vehicle? As previously stated, vehicles purchased more than 910 days prior to filing the bankruptcy case may have the loan balance crammed down to the present value of the vehicle. This can represent an enormous savings and encourages people to keep older vehicles that are worth less than the loan balance.
The final issue is: what is the contract interest rate? In a Chapter 13 case the interest rate can be adjusted to a maximum allowed interest rate, called the "Till rate" so named after the U.S. Supreme Court case, Till v. SCS Credit Corp., 541 U.S. 465 (2004). The Till rate is adjusted twice a year by the bankruptcy court, and has recently been around 5%. Vehicle debt for many Chapter 13 debtors is paid at the Till rate over the course of the bankruptcy case.
What does all of this mean? If you purchased a car more than two and a half years ago, and you owe more than it's worth, your car loan will be adjusted to the vehicle's value and the debt will be amortized over the Chapter 13 payment period at the Till rate. That is generally a substantial savings!
The federal law contains several strategies for keeping a vehicle during Chapter 13 and Chapter 7 bankruptcies. If you need to discharge your debts in bankruptcy, speak with an
experienced bankruptcy attorney to discuss your options to retain your vehicle. In many cases bankruptcy debtors pay less for monthly vehicle payments after filing bankruptcy. Get the facts today and get control over your financial future.
Contact the experienced Chicago bankruptcy attorneys at Glanzer & Associates, P.C. at 1-312-644-2227 to discuss your specific situation, and to schedule your free, in-person consultation.