Keeping Your Vehicle During Chapter 13 Bankruptcy
While some Massachusetts debtors are able to get by without a personal vehicle, having reliable transportation is necessary to most. Whether it is a means to get to work, or to school, or to take the kids to soccer practice, a vehicle can be an important part of daily life. It is no wonder that one of the first questions Worcester and Framingham bankruptcy clients ask is, "Can I keep my vehicle during bankruptcy?"
For most people the answer is simple. YES!
If you have no car loan then there is nothing more you need to do. If you have a car loan you will need to continue making payments in order to keep the car. However, in some cases you may be able to lower your payment by extended the term of the re-payment, reducing the interest rate or reducing the principle amount owed.
If your purchase was within 910 days of your bankruptcy filing, the Bankruptcy Code requires that you pay the entire value of the loan, usually within the three to five year payment period of bankruptcy case. If the vehicle was purchased more than 910 days before the bankruptcy filing, the court will adjust the monthly payment based on how much the vehicle is worth.
The second issue is: what is the contract interest rate? In a Chapter 13 case the interest rate can be adjusted to a maximum allowed interest rate, called the "Till rate" so named after the U.S. Supreme Court case, Till v. SCS Credit Corp., 541 U.S. 465 (2004). The Till rate is adjusted twice a year by the bankruptcy court, and has recently been around 5%. Vehicle debt for many Chapter 13 debtors is paid at the Till rate over the course of the bankruptcy case.
The final issue is: how much is owed? For vehicle purchases more than 910 days prior to filing the bankruptcy case, the vehicle debt may be "crammed down" to the present value of the vehicle. In other words, if you purchased a car more than two and a half years ago, and you owe more than its worth, your car loan will be adjusted to the vehicle's value and the debt will be amortized over the Chapter 13 payment period at the Till rate. That is generally a substantial savings!
The federal law contains several strategies for keeping a vehicle during bankruptcy. If you need to discharge your debts in bankruptcy, call the Law Office of Robert W. Kovacs, Jr. toll-free at (877) 315-2641 and discuss your options to retain your vehicle. In many cases Massachusetts bankruptcy debtors pay less for monthly vehicle payments after filing bankruptcy. Get the facts today and get control over your financial future.