Chapter 13 is much different than a chapter seven, where one is often required to liquidate their assets. In a chapter 13 one is allowed to keep their assets and is put on a repayment plan for their debts. In the case of an auto loan then Omaha residents, and anyone else throughout Nebraska, can receive two benefits. First, if you are upside down on your auto loan then your may be able to reduce the principal to the current value of the car. Second, if you are currently behind on your auto loan then you can avoid repossession.
The chapter 13 process allows you to “cramdown” your auto loan. What this means is that you will be allowed to keep your vehicle under the bankruptcy plan and that the amount you owe on it will be reduced to the current value of the vehicle. For example, if you owe $15,000 on your loan but the vehicle is only worth $10,000 then the amount you owe on the vehicle will be reduced to the $10,000. That amount will be repaid along with your chapter 13 payment. There are two limitations to this. First, you must have purchased the vehicle more than 2 ½ years ago to be eligible for this type of cramdown. Second, if you drive a luxury vehicle then the Court will typically not allow you to cramdown its value; the chapter 13 process allows you to have “reasonable” expenses and Courts will not view keeping your Porsche as reasonable.
Filing for chapter 13 also deals with your being behind on your car payments. Once you file for bankruptcy than an “automatic stay” is put in place which stops any repossession of your car. The amount by which you are behind on your payments will be caught up through your bankruptcy payment plan. As long you stay current on your regular payments then you will be able to keep your vehicle, and again, will often not owe more than the current value of it.
On October 1st, 2014 CNBC again reported that America is facing a new sub-prime lending crisis due to bad auto loans that have been made in recent years. A percentage of these new “sub-prime” loans will be in Nebraska and residents of our state are undoubtedly struggling to make their car payments along with paying their other debts. The chapter 13 process is designed to assist people in this situation. As an Omaha, Nebraska bankruptcy lawyer I regularly assist people throughout our state with these types of situations. Contact our office today for an initial case assessment.
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