A chapter 13 bankruptcy filing may allow someone to get back their repossessed auto.
After the bankruptcy filing, the auto company will request proof of adequate auto insurance. The auto insurance must reflect that the finance company is covered as the loss payee or lien holder. This means the finance company is protected in the event of auto damage or theft. Typically, the insurance must include a deductible of not more than $500.00. If the debtor provides such proof, the auto finance company is required to turnover the vehicle to the debtor.
After the finance company receives proof of the bankruptcy filing and adequate auto insurance, the finance company will notify the debtor of the whereabouts of the vehicle. Typically, the debtor is permitted to pick up the auto with the repossession charges and storage fees to be paid through the monthly bankruptcy plan payments.
In order to keep the auto, the debtor must file a feasible chapter 13 bankruptcy petition and plan that provides for sufficient payments of the financing. In general, the debtor may have three payment options for the financing, under certain circumstances. The first option permits the debtor to pay the total amount of arrears, at the time of the filing, through the monthly trustee payments, while making the future monthly payments directly to the finance company. The second option is to pay the total amount due on the financing through the monthly bankruptcy plan payments. Under this scenario, the debtor must pay an additional sum for interest on the vehicle.
The third option permits the debtor to pay only the fair market retail value of the vehicle, through the bankruptcy plan, plus an additional sum of interest. This option is called a cramdown for the auto finance agreement, which is limited to specific situations. If the debtor meets the criteria, he is permitted to eliminate the difference between the value of the vehicle and the balance due on the financing.
Also, the petition and plan must be feasible, which means that the debtor is able to provide proof that he is able to make the necessary monthly trustee and/or direct monthly finance payments.
Robert Manchel, the bankruptcy attorney in New Jersey, may be contacted at(866) 503-5655.