Will Filing Chapter 13 Lower My Car Payments?

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For those who wish to lower car payments, filing bankruptcy is unlikely to help. However, the entire process may be beneficial nevertheless. By understanding how a Chapter 13 bankruptcy works, you may be able to get a lower monthly payment on your overall costs. That could help you to see a significant improvement in your budget. Speak to an attorney about your particular case, however the following information can be helpful.

How Chapter 13 Bankruptcy Works

For those who are filing Chapter 13 bankruptcy, the first step in the process is to put together a repayment plan. This plan will help you to repay the debts you need to during the bankruptcy. Some debts will be paid nothing while others are paid in full. Take a closer look.

  • Secured debts, such as car payments are paid in full. You will not lower car payments during bankruptcy since these lenders are paid in full unless you wish to get out of the loan (which means the trustee will seize your vehicle.)
  • Unsecured debts, including credit cards, that are not considered priority debts, may be paid a small amount of less. In general, most of these debts are paid only what they would have received in a Chapter 7 bankruptcy. In no asset cases, this is one percent or less.

In some situations, the bankruptcy trustee may be able to help you to lower car payments by negotiating with the lender. However, it is more likely that you will end up paying these payment. Keep this in mind, though. If you file for bankruptcy, the cost of the bankruptcy repayment each month is likely to be the combination of your car loans and slightly more to pay attorneys.  You no longer have to make monthly payments to your credit cards or other unsecured debts such as medical bills.

In addition to this, realize that if you are struggling with car payments that are too high, you may wish to reconsider keeping the loan. In some situations, it is better to let go of an expensive car payment and allow the courts to seize the vehicle especially if this makes your monthly bankruptcy repayment too high for you to keep paying.

Focus on an Attorney

Before filing for Chapter 13 bankruptcy, work with an attorney to set up a repayment plan that works for you. Your attorney may help you to lower car payments if negotiating with the lender will help you.