Car loans are secured debts, which means the lender has the right to repossess the vehicle if you miss a payment. This can happen in as little as a few days after a single missed payment. If you are experiencing trouble with your finances, filing for bankruptcy can help buy you some time to resolve your unpaid debt collections.
Road To Relief
In most cases, a car loan is best managed in a Chapter 13 case. The reason is that repaying your debt through Chapter 13 simplifies your debt resolution plan and keeps the risk of liquidation minimal. While you may not think you can afford to repay your debt in a Chapter 13 case, there are a few key aspects of Chapter 13 that you should know about.
First, Chapter 13 spaces out your debt payments over a period of up to five years. A longer repayment window means smaller, more affordable payments. Further, repaying the debt rather than liquidating it means better protection of your credit chances in the future.
Also, you may be able to reduce the interest rate or the principal amount owed on your car loan debt under the 910 day rule. If your car is worth significantly less than what you owe on the loan, the difference between these amounts may be erased. In this case, you would only be responsible for repaying the portion of your loan that is equal to the value of the car.