When you are struggling financially, bankruptcy might be your best option. However, this decision can significantly impact your assets, including your vehicles. A car is an essential item for most people, and you may be worried about losing it.

Filing for bankruptcy is an excellent way to prevent lenders from collecting their debts and assets related to it. However, the lender can go to court and lift the automatic stay – that is why you need dedicated Oklahoma City bankruptcy attorneys to protect your interests.

What Happens to My Car if I File for Bankruptcy?

In a Chapter 13 bankruptcy, you get to keep all your assets, including your motor vehicles. Unlike in Chapter 7 bankruptcy, no trustees are tasked to sell your property to recover money to repay your creditors.

Instead, you create a payment plan for settling all the debts. And if your car has non-exempt equity, you will have to include a repayment plan for settling the unsecured debtors.

What Happens If I Was Behind Car Loan Payments Before Filing for Bankruptcy?

Filing for Chapter 13 bankruptcy gives you the advantage of the automatic stay, and the lender cannot repossess your car even if you were behind with payments. The lender can be enrolled into the payment plan if they file a “proof of claim” indicating how much you owe in arrears.

If you do not object or cram down the car loan, the amount will be paid through your plan. However, if you decide to exclude the car loan from the plan, you need to match up the arrears. Otherwise, the lender can repossess the vehicle with the court’s permission.

What Happens When I Cram Down the Car Loan?

Chapter 13 Bankruptcy allows you to reduce your car loan’s principal balance to the fair market value. You may also reduce the interest rate if you satisfy the conditions of a cram-down. For example, if your loan balance is $10,000, and the vehicle’s market value is $7,000, cramming down means that you will have to pay $7,000.

The balance from your initial loan amount is usually wiped out and considered unsecured debt. And once you complete your plan, you obtain a discharge that fully allows you to own the car. Your Chapter 13 bankruptcy lawyer in Oklahoma City can tell you whether you qualify for a cram down or not.

What Can I Do If My Car Has Been Repossessed Already?

In Oklahoma Chapter 7 bankruptcy, an individual can use exemptions to keep his/her car valued up to $7,500, and $15,000 for married couples. And if you can prove that you need the car to facilitate your professional work, you can also keep the one worth up to $10,000 – but it has to be a truck for construction and not the one you use to go to work.

There is no limit to the value of the cars you can keep in Chapter 13, provided you propose a repayment plan. No need to panic if your vehicle has been taken away by the lender already since there is a way out. An experienced Oklahoma bankruptcy attorney can help in the following ways:

– File for Chapter 13 bankruptcy

– Prove that the vehicle is necessary for your household 

– Come up with a repayment plan that can cover all the payments – past and future

– File a motion for turnover and order the lender to return the vehicle

How Do I Pay for My Car Loan in Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is basically a proposal for debtors to make repayments within three to five years. While you can commit to making monthly payments towards clearing your car loan, it does not take away the lender’s lien on the vehicle.

After filing the Chapter 13 bankruptcy, you will be assigned a trustee with whom you will be making payments according to the agreed plan. A portion of the payment is usually sent to the car lender. If you want to keep the car, you ought to continue making those payments – because the lender can rightfully repossess the vehicle if you fail to repay.

What Happens If I Take a Car Loan Shortly Before Filing Bankruptcy?

Many people consider buying a new vehicle before filing for bankruptcy to qualify for Chapter 7 bankruptcy and deduct an additional car ownership expense. However, your trustee might question this decision if the purchase took place shortly before filing for the case.

The trustee can consider this an abuse of the system if they realize that you only got the car loan to qualify for Chapter 7 bankruptcy. However, if you got the vehicle to replace another one that broke down – the purchase may not be considered a red flag.

Can I Qualify for a Car Loan After Filing for Bankruptcy?

If you file for Chapter 7 bankruptcy, all your previous creditors will be off your hook. Therefore, most car dealers are willing to give you a car on credit since you won’t be able to file for another bankruptcy for the next eight years. However, the interest rate may be higher than before because of the financial risk they are taking.

Buying a car after filing Chapter 13 bankruptcy is subject to the court’s approval. Most car dealers are not too willing to wait through this process that involves identifying the vehicle and waiting for the court to approve both the car and the financing. Reducing the value of regular payments to unsecured creditors sounds like an excellent way to fit in the new car, but the creditors can object.

Legal Counsel Throughout the Process

If you are overwhelmed by debt, you can work towards a more manageable situation with the help of a bankruptcy attorney near you. A skilled attorney can help you determine the best alternative for your car loan in bankruptcy.

Are you determined to get your finances and life back on track? Start this journey by speaking with a bankruptcy attorney in OKC today.