Your House & Car in Chapter 13
Skilled Bankruptcy Attorneys Serving Clients Across Hawaii
Do you have a steady income but are drowning in debt? Did you know that filing for Chapter 13 bankruptcy can stop foreclosure, stop repossession, and allow you to become current on both your home and your car payments? As one of the largest filers of Honolulu bankruptcy, our experienced attorneys at Blake Goodman, PC, Attorney know exactly how to arrange a payment plan for your mortgage and car loan to get your financial life back on the right track.
If you are being threatened with foreclosure or repossession, then filing for personal bankruptcy will immediately stop the proceedings through what is called the “automatic stay.” This is a court order that occurs instantly when filing bankruptcy and stops the lender from foreclosing upon a home or repossessing a vehicle. You can then review your options to save your home and car with your bankruptcy attorney.
What Happens to My Home In Chapter 13?
A Chapter 13 bankruptcy establishes a payment plan so you can catch up with your secured debt obligations (including a mortgage) over three to five years and discharge any remaining unsecured debts. Once the plan is approved by the court, you will make one single monthly payment to the bankruptcy trustee. This repayment plan will include provisions to help pay off any accumulated mortgage rearrange (the back amount owed). Most people who file Chapter 13 make all the required payments and eventually become current on the mortgage, saving their home.
Another benefit of Chapter 13 is for homeowners who have a second mortgage and owe more money on the primary mortgage than the property is worth. In this situation, the second mortgage or line of equity may be eligible for a complete discharge. Known as a “lien strip,” this can be extremely helpful for homeowners whose property value has dropped in recent years.
What Happens to My Car In Chapter 13?
The depreciatory nature of an automobile means that people sometimes owe more for a vehicle than its actual value. If this is the case, when you file for bankruptcy, you may qualify for what is called a “cramdown.” A cramdown reduces the amount owed to the car’s actual value because it is the amount that the lender would receive if it repossessed and sold the vehicle.
To qualify for a cramdown, you must have purchased the car more than 2 ½ years before filing for bankruptcy, along with other requirements. A qualified lawyer can review the facts of your situation to see if a cramdown is available to you.
As with homes, a Chapter 13 plan can also allow you to pay the arrearage (or late payments), helping you to become (and stay) current on your car loan. The number of car payments must be considered reasonable by the courts, however – if you are making an exceptionally large payment every month for a luxury car, you might have to downgrade to a more affordable vehicle.