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What Happens To Your Car Payment When You File For Chapter 13?

When you file for Chapter 13, what happens to your car payment?    Usually you will be required to pay car payments through the Chapter 13 plan.  Also, the Chapter 13 case can make your car payments much lower and much easier to pay.

Who pays my car payment during the 13?

The Chapter 13 Trustee usually pays your car payments through the terms directed on your Chapter 13 plan. During the Chapter 13 case, the Trustee usually pays off your automobiles first because they are “secured” debts.   After the cars are paid, the Trustee then switches to paying your unsecured creditors.   A monthly prearranged payment is made to each automobile creditor that follows the terms of your plan.  If there are no specific terms, the Trustee just pays the maximum amount possible to the automobiles at each stage of the plan.  Essentially, the Chapter 13 Trustee ensures that your cars are paid an appropriate amount and that all terms of the plan are followed.

Can I pay my automobiles directly instead of having the Chapter 13 trustee pay them?

Generally, in the Indiana Southern District for Bankruptcy, the Chapter 13 trustee requires all short-term debts to be paid through the plan. Therefore, if you have a conventional automobile loan, the Trustee will usually request that it be paid through the Chapter 13 plan.   In some cases for appropriate reasons, the Trustee will allow direct payments to automobile creditors. Usually, the Trustee prefers that only almost-paid-off automobiles have their payments made directly to the creditor.  Remember, that the Trustee can bring an objection to your plan.  If you are not following the requirements for paying an automobile properly through Chapter 13 plan, it may slow down the confirmation of your Chapter 13 case.   Later you may be forced to amend your plan to have the Trustee pay the automobile payment.

Leases and Other Special Circumstances

Generally, all lease automobile payments are paid directly to the lease creditor. If you are leasing an automobile, you need to make those payments directly.   In other rare circumstances, it may also be appropriate to structure an automobile payment to be paid outside the plan.   Keep in mind that all Chapter 13 plans are different. Ultimately, it is your responsibility to both read and understand the terms of the plan.   The debtor signs the Chapter 13 plan, pledging that they will follow its terms and conditions.  If you have questions about your Chapter 13 plan, you need to ask your attorney immediately.