What happens to my car in a Chapter 13?

A Chapter 13 consolidates most of your debt. You can make a car payment much more affordable in a Chapter 13. Not only can you pay a lot less on debts like credit cards and medical bills, as little as 0% depending on what you can afford, you can spread out car payments and lower interest rates in a Chapter 13 plan.

If you are behind on your car payments and your car is in danger of being repossessed, a Chapter 13 stops the repossession dead in its tracks. In some cases we can even get repossessed cars back by filing a Chapter 13 before the car is sold at auction, though you may be responsible for some storage costs.

If you bought your car over 910 days (2 ½ years) ago or it was refinanced, you can “cram down” the loan in a Chapter 13. A cram down is when you pay back the value of the car with a reduced rate of interest, paying the balance as “unsecured”, at the same percentage in you plan as you would a credit card or medical bill. Even if your car was purchased more recently, you can pay a lower interest rate which only applies to the part of the loan that is secured (the part covered by the value of the car).

If you do not want a car you are paying for, you can surrender it back to the creditor. The creditor can then sell the car and file an unsecured claim for anything left on the loan.