Auto Loan and Bankruptcy
Can I Get Rid of an Auto Loan and Keep My Car in Bankruptcy?
You usually surrender a car in bankruptcy to get rid of a car loan. Can you instead just get rid of the car loan but keep the car after bankruptcy? The answer to this is usually “no.” The car creditor will repossess the car eventually. However, in some cases, you may be able to keep your car with getting rid of the car loan.
Playing “Hardball” or Negotiating with the Creditor
You may be able to “play hardball” with the creditor. You can just tell the creditor that they need to either write off the car loan or reduce the terms. Tell them to simply repossess the car if they will not give you the title or reduce the terms. Sometimes you can just ask them to settle for $1000 to $2000 to release the title. This is especially true with older cars where going through the repossession process will leave the creditor with very little or nothing. It is easier to negotiate with small banks or finance companies with local agents you can talk to much easier.
Filing Chapter 13 and Paying Much Less
If you have a considerable amount of debt, it may be possible in some cases to file Chapter 13. Your Chapter 13 payment plan can sometimes pay a much lower amount towards your car note. This coupled, with a much lower payment for all other debts, can effectively seem as if you have completely eliminated your car debt.
For instance, you could have a situation where you were formerly paying $600 per month for your credit cards and loans. Your car payment was formerly $450 per month. In certain cases, you may be able to do a Chapter 13 payment where everything is paid for $520 per month. This could be the equivalent of removing your car payment entirely from your budget. Other cases could even have a much lower payment.
For such a Chapter 13 reduction, there may be some income restrictions. You would likely need to make less than the median income line. This would require your income to be $50,000-$100,000 or less, depending on your household size.
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