Here’s some of the very good news you might hear if you followed up on your New Year’s resolution to go see a bankruptcy attorney.
One of the most satisfying parts of being a bankruptcy attorney is when—just about every day—I get to give some really good news to a new client. My clients are often very pleasantly surprised to hear the unexpected good news. They often honestly tell me that they wished that they had come in to see me earlier to get that good news. Hopefully the following examples will inspire you to make meeting with a bankruptcy attorney your top New Year’s resolution. And then also inspire you to check that resolution off your list in January.=
Today’s blog post gives some great news, with much more to follow.
Stop a Vehicle Repo, Never Catch Up on Late Payments, AND Reduce the Monthly Payments
If you are now struggling to keep current on your vehicle loan, that’s probably for one or both of two reasons:
1) your other debts that make it difficult to have enough money left over each month for your vehicle payment, or
2) your vehicle loan payments are just too large.
Either Chapter 7 “straight bankruptcy” or Chapter 13 “adjustment of debts” can solve the first problem. Chapter 13 may be able to solve the second problem.
The Good News of Chapter 7
If hanging onto your car or truck is very important to you, filing a Chapter 7 bankruptcy would likely discharge (legally write off) all or most of your other debts, enabling you to focus on getting and keeping current on your vehicle loan. You could choose to NOT discharge your vehicle loan and keep your vehicle. This also gives you the advantage of immediately starting to rebuild your credit through that vehicle loan.
But keeping a vehicle that you owe money on in a Chapter 7 case virtually always means that:
1) you have to catch up if you are behind on your payments, and usually must do so within a month or two of filing the bankruptcy case, and
2) you are stuck with the original monthly payment amount.
If getting rid of your other debts allows you to both catch up quickly and pay future payments consistently, then Chapter 7 would likely be great news for you. You would finally stop being anxious every month about making that vehicle payment. Your life would be so much saner.
You might even want to see a bankruptcy attorney quickly, especially if you are behind on your vehicle payments. Creditors can be very fast about repossessing a vehicle once you fall a payment or two behind. The filing of your bankruptcy case will stop the repossession, give you some time to catch up, and save your vehicle.
The Even Better News of Chapter 13
But you may need some even better news. What if you needed to lower the vehicle loan payments? Or couldn’t catch up on any missed payments within a month or two? Chapter 13 may be able to solve either or both of these problems in a way that even Chapter 7 could not.
If your vehicle is worth less than what you owe on it, AND you bought and financed it more than 910 days ago (about two and a half years), through a Chapter 13 “cramdown” you could very likely reduce the monthly payments on your vehicle loan, and often greatly reduce them.
“Cramdown” enables us to re-write the terms of your loan, often reducing the interest rate, reducing the overall amount to be paid—often by thousands of dollars, and usually stretching out the payments over a longer period. In combination these can take hundreds of dollars off your monthly payment. And you would not have to scramble to come up with any missed payments.
AND you would end up owning your vehicle free and clear, after paying less per month and less overall.
THAT would be very good news for you in 2014.