When you file Chapter 13 bankruptcy in Northwest Georgia, your financed car will be paid through the plan. For many debtors, this can drastically lower your monthly bills. Many bankruptcy clients have difficulty understanding that their car payment is included in the Chapter 13 plan. As a Northwest Georgia bankruptcy attorney, I love it when the light comes on and it becomes clear to the client that Chapter 13 is going to provide some huge relief.
I would like to walk you through an example of how financed cars are treated in a Chapter 13 bankruptcy. Let’s say you have a person from Dalton, Georgia who owes $10,000.00 on a financed vehicle that was purchased more than 910 days before the filing of the case. Also, assume the interest rate is twenty five percent and that the vehicle is worth about $5,000.00. Believe or not, there are many people in Dalton who pay twenty five percent APR on their vehicles.
The first benefit that this hypothetical person will receive in bankruptcy is a lower interest rate. As a general rule, this interest rate will be around six percent. Right off the bat, this person will save money in a Chapter 13 bankruptcy case.
The next huge benefit is that this person will pay the value of the car instead of the amount owed. In this case, this Dalton resident will pay $5,000.00 in a Chapter 13 plan instead of the $10,000.00 that is owed per the contract. Thus, not only did the interest rate get knocked down but the balance to be paid is knocked down as well.
Once the case is completed, this Dalton filer will receive the title. However, if the case is ever dismissed for any reason, all of the contract interest and contract balance comes back to life.
If the car has been purchased within the 910 day period before filing, the entire contractual balance will have to be paid. We can still lower the interest rate but if you made a bad deal on the purchase price, Chapter 13 is not going to help you out of it unless you surrender the car to the creditor so that we wipe out the debt.