What affect will filing chapter 13 bankruptcy have on my vehicle loan?
Filing chapter 13 bankruptcy will immediately stop repossession of your vehicle. You will have the option to retain your vehicle and make modified payments to a trustee through a repayment plan, or you may voluntarily choose to “surrender” the vehicle to the lender. If your vehicle loan is more than 910 days (2 1/2 years) old or is a “non-purchase money loan” (a loan you obtained on a vehicle you already owned), your repayment plan may reduce the principal balance of your loan to the vehicle’s “retail value” as determined by Kelley Blue Book, the NADA Vehicle Pricing Guide or an appraisal. Regardless of the date of your loan, you can also lower the interest rate to a market rate of interest (usually about 7%) and also extend the term of your loan up to a maximum of 5 years (60 months). If you fall behind in your modified vehicle payments during your bankruptcy, the bankruptcy court may grant permission for your automobile lender(s) to repossess your vehicle.
