Getting behind on your car loan can be tricky business. Since it is a secured loan, the creditor maintains the right to repossess the car if you default on your payments. To make matters worse, most car loan lenders are not willing to negotiate repayment terms when you get behind and, instead, choose repossession in most cases. However, filing for Chapter 13 bankruptcy can help you keep your car and get caught up on your missed payments.
Chapter 13 Repayment Plan
Perhaps the best news about your car loan when filing for Chapter 13 is that you are likely to significantly reduce the amount you owe on the debt. Not only will you get caught up on payments and be able to keep your car, you may end up paying less than your originally owed on the car.
In most Chapter 13 cases, you can obtain a lower interest rate on the car loan once you file. A lower interest rate means paying less for the vehicle over time. Bankruptcy laws also allow for you to split your car loan into two parts: (1) the secured debt, which is equal to the value of the car (2) the unsecured debt, which is the remaining balance between the value of the car and the amount owed. Once the loan is split the unsecured debt portion can be written off.