Chapter 13 Bankruptcy and Car Loans: What You Need to Know


“What will happen to my car after I file Chapter 13 bankruptcy?” This is one of the most frequently asked questions about cars and Chapter 13 bankruptcy. Usually, Chapter 13 allows you to keep your car and pay off your car loan with a repayment plan. Depending on the situation, if you have little nonexempt equity in your car and your car payment is reasonable, you can be eligible for the plan. In addition to that, you might be able to reduce the car loan amount under certain circumstances. You may need a bankruptcy lawyer in OKC to handle this situation. Continue reading for more detailed information.


If you are acquainted with how to file bankruptcy in Oklahoma, you must know there are Chapter 13 and Chapter 7 bankruptcies. Each chapter consists of different laws. With Chapter 13 bankruptcy, know that you can keep your property, including your car. According to the laws of Chapter 13, the trustee will not sell your property to pay the creditors. But the condition is to use your income to pay the creditors within the tenure of three to five months. This is the repayment plan under Chapter 13.
If you file Chapter 13 bankruptcy, you will not have the risk of losing your vehicle. Otherwise, with the interrupted flow of your regular payment, lenders hold the right to repossess the car. Under Chapter 13, the balance will be paid off through the repayment plan. The lender will not be able to take your car, due to the “automatic stay” rule. The maximum they can do is to file a proof of claim showing the amount you owe them. A professional bankruptcy attorney in Edmond, OK, can help you file bankruptcy under Chapter 13.


Your repayment plan can be affected if you have lots of nonexempt equity in the vehicle. But generally, due to the nature of car loans in OKC, it is very unlikely for you to have excess equity in your vehicle.
Additionally, your car payment should be reasonable. If you have a large luxury car and the court finds that it does not belong under the reasonable expense category, you may not be permitted to use it. The rule is established in that way because the net amount from your whole income minus your necessary living expenses is used to repay debts under the repayment loan. Therefore, the maintenance of a luxury car may decrease the amount to repay the loan.


If your loan amount is greater than the cost of your car, and your car is more than two-and-a-half years old, you may get to cut the amount of your car loan with Chapter 13 bankruptcy. Technically, this is called a cramdown. You can reduce the amount to the value of your car, and the rest will become unsecured debt. A bankruptcy lawyer in OKC can help you in this area along with how to file bankruptcy in Oklahoma.
You can connect with Chris Mudd, a reputed law firm in OKC, to provide all these necessary services regarding bankruptcy. Our team of efficient attorneys will handle the case on your behalf.

** Disclaimer: This blog post does not constitute legal advice, nor does it create a client-attorney relationship.