How a Chapter 13 can Solve Your Vehicle Issues

If you find yourself behind on your car payments, you may want to consider filing a Chapter 13 bankruptcy petition.


1. A Chapter 13 bankruptcy case, once filed, immediately imposes what is known as the “automatic stay.” The automatic stay is the most powerful tool a bankruptcy lawyer possesses. Creditor collection activity is completely shut down, the ‘repo man’ included.

2. A Chapter 13 case allows you to catch up your back payments by placing that arrearage into the Chapter 13 plan. It should be noted that you must continue to make your regular payments under the loan during the pendency of the bankruptcy case. If you keep up with your Chapter 13 plan payment and your regular car payment, you can get ‘back on track’ with your vehicle and pay off your loan.

3. Chapter 13 bankruptcy can allow you to “cramdown” your loan. What is that? Essentially, the debtor, with the help of his/her attorney, changes the terms of a contract with a secured creditor with the help of the court. A cramdown reduces the amount owed to the creditor to reflect the fair market value of collateral that was used to secure the original debt. Any difference between the original amount owed to the creditor and the cramdown amount becomes ‘unsecured debt’ and subject to Chapter 13 plan treatment as such.

4. Chapter 13 cases can allow you to simply surrender the vehicle to the creditor. This might happen if you have an older car with a high interest rate and a history of maintenance issues. Once “surrendered”, it will then be sold at auction and any difference could still be owed through the Chapter 13 payment plan as ‘unsecured debt.’

If any of these vehicle issues present in your financial situation and you wish to discuss the matter with a bankruptcy lawyer, please contact Winslow & McCurry, PLLC at (804) 423-1382.