How Bankruptcy Can Help You Keep Your Car

Most of the time, people think about bankruptcy as a way to help them eliminate their debts and start fresh. But, did you know that bankruptcy can also help you keep your car or even lower the overall amount of money you have to pay for your car?

In Chapter 7 bankruptcy, if your car is less worth than what owe on it, you have the option to redeem your car for its actual value. What does this mean? This means that if your car is worth $5,000 and you owe $10,000 on it, you can pay $5,000 for your car. This is done by filing a motion for redemption. However, you must be prepared to pay your lender that $5,000 immediately.

What if coming up with the funds is too difficult and redemption is not a possibility for you? Well, in that case, Chapter 13 offers you some options that may make this easier. In Chapter 13 you can spread out your whole loan balance in a repayment plan of up to 60 months. So, if you have 2 years left on your loan, you may be able to spread out the balance owed over five additional years. This will lower the amount you have to come up with less each month to pay for your car. In addition, in Chapter 13, you can reduce your interest rate to what is known as the "Till" interest rate which is generally prime plus 1-3%. So, in today's market, that would be about 5.25%. If you purchased your car more than 910 days prior to your bankruptcy filing and it is worth less than what you owe, you may also be able to reduce your loan balance to your cars current value and also reduce your interest rate.

Bankruptcy, especially Chapter 13 bankruptcy, can be an excellent way to help you keep your car and save you some money at the same time. If you are having trouble paying your credit cards or any other debt and are also having trouble making your car payment, make sure to consult with a bankruptcy attorney to compare what options you may have. The relief available to you may be greater than you think!

Questions or interested in a free consultation about your case? Email Natasha Meruelo, Esq. at or call me at (914) 752-5098. The first consultation is always free.

Natasha Meruelo, Esq. is located at 445 Hamilton Avenue, Suite 1102, White Plains, NY 10601.

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