Florida Chapter 13 cases often come with questions about cars. Clients frequently own or are financing an automobile and are worried about losing their car when they file a Chapter 13 petition. This is a reasonable concern, especially since the main benefit of Chapter 13 bankruptcy over Chapter 7 bankruptcy is that it is supposed to allow you to keep most or all of your assets.
The Good News for People Filing Chapter 13 Bankruptcy
The good news is that when you file for Chapter 13 bankruptcy in Florida, there may be a way to get relief from car loans with high payments, high interest, or loan amounts greater than the car’s value. If you are paying a high interest rate on your car loan or have payments that are too high to be affordable, Chapter 13 may be able to help you lower the interest rate or payments. Many people are paying more than 10% for their car loans. In Chapter 13 cases filed in Florida, it is fairly routine for a lender to be required to accept 10%.
Most people who are making car payments will pay them at a lower rate after declaring Chapter 13 bankruptcy.
The Till Rate
The reason that many lenders will accept a 10% rate is due to the outcome of a court case that set a fair rate for car loans. The shorthand lawyers use is called the Till Rate, named after a 2004 court case decided by the U.S. Supreme Court called (what else?) Till v. SCS Credit Corp.
There are some limitations on your ability to use a Till Rate, but if it is possible, then it would allow you to reduce your car loan rate – and thereby lower the monthly payment amount.
Let’s take an example of how the Till Rate may work for you. Let’s say you’re paying $500 per month for your SUV. The loan has 36 months left on it, and your interest rate is 18%. When you file for Chapter 13 bankruptcy, I may be able to reduce that amount to 10%; you’d pay the balance of the loan through your Plan, which would reduce the monthly payment and possibly provide some relief.
One potential pitfall with this scenario is that you must complete your bankruptcy case. If your case is dismissed or fails, the deal is off and you’ll be back to your old 18% rate, and have to catch up the shortage you were paying during the time you were in chapter 13.
Worried about losing your car after filing for Chapter 13 bankruptcy? I will help you get your finances back on track while keeping your prized possession. Contact me at (407) 749-0080 today.
Committing to a Chapter 13 Payment Plan
This type of bankruptcy requires a long-term commitment. You will need to make payments, on time, for three to five years. The cost of those payments is determined by the court based on your ability to repay, so you won’t be required to pay more than your income allows.
However, just because the payment plan is viable, that doesn’t necessarily mean it is easy. You will likely need to be very careful with money for the full duration and won’t be able to enjoy luxuries. That can be a difficult commitment for some people. Not everyone successfully makes it through Chapter 13 bankruptcy. Failing to complete bankruptcy is difficult because your debts are still hanging over your head and you can no longer rely on the bankruptcy process to protect you. In this situation, you would likely lose your car as you would be required to make full payments to catch the loan up at the same time that all of your other delayed bills also come back to life.
What if Your Car Is Paid Off?
This is the best-case scenario. If you have no debt on your vehicle, it shouldn’t be at risk in a Chapter 13 bankruptcy situation. As soon as you enter Chapter 13 bankruptcy, an automatic stay is placed on all of your debts. This means, among other things, that creditors can’t place liens on your property.
Safety of Your Car After Bankruptcy
Possibly the best news is that once the bankruptcy process has been completed, you will no longer have any debt on your vehicle, unless your loan is longer than the life of the plan. That is true even if the amount you paid during the bankruptcy process was less than the total amount that you should have paid to fully pay off your car. That is the beauty of the bankruptcy system. It is designed to help you get a fresh start as long as you do your best to pay what you can.
The experience of a debt-free life is a powerful one, possibly allowing you to take care of your family and provide for your future in a way not otherwise possible.
Contact a Chapter 13 Bankruptcy Lawyer in Florida Immediately
The fear of losing your car from bankruptcy is entirely reasonable. Thankfully, that is a fear that shouldn’t come to fruition with the right preparation and assistance. My law firm can help you take advantage of bankruptcy without losing your freedom to get around.
Chapter 13 bankruptcy may seem daunting, but it can potentially protect you when you are in financial peril. When you’re ready, it’s worth it. Call (407) 749-0080 now for a free consultation to see how I may be able to help you.
