It’s the rare American who doesn’t own a car.  Nearly all of us need them daily to get to and from work or school.  So, it shouldn’t surprise you that people going through bankruptcy must have a car as well.

Fortunately, for folks who own older vehicles, it’s usually easy to protect those cars by using the bankruptcy exemption laws.  These are laws that are specifically designed to provide asset protection for all kinds of property from home equity to vehicles, from bank accounts to retirement plans.

In short, I can hardly think of a situation involving a client who’s been forced to surrender a paid-off car.  The Bankruptcy Trustees generally aren’t even interested in asking about them.

Cars with Loans

What about vehicles that are secured with loans?  In a Chapter 7 case, the car lender will continue to abide by the car contract.  In other words, as long as you continue to pay your loan on time, you should be fine.  Yes, there is the concept of car reaffirmation agreements that you should know about and consider, but otherwise, the lender is never going to attempt to repossess a vehicle just because you filed bankruptcy.

In a Chapter 13 case, it’s often a big budgetary improvement whenever a prospective client is looking into a Chapter 13 filing.  This is because the balance of the car loan will be paid off during the 36 or 60 month term of the Chapter 13 plan.  And because the Chapter 13 Trustee of Western Pennsylvania makes all monthly car and mortgage payments through the Chapter 13 plans, this can mean that you can wind up saving money on your monthly budget once you enter the Chapter 13.

Additionally, in Chapter 13, you can often reduce the interest rate on a car loan to around 4.5 or 5 per cent as long as you successfully complete the Chapter 13.

The bottom line is that while each Chapter 13 case is unique with its own facts and circumstances, in many cases, a Chapter 13 filing can provide individuals with relief from burdensome car loans.