Ch. 7 or Ch. 13: Which Bankruptcy Can Save Your Car from Repossession??

If you’re facing the looming threat of car repossession due to unpaid car loans, you’re not alone. Many people in Raleigh, NC, find themselves in a similar situation, struggling to make ends meet while trying to keep their vehicles. Fortunately, bankruptcy offers a way to protect your assets, including your car. This blog post compares Chapter 7 and Chapter 13 bankruptcy and discusses which one is most effective in preventing repossession.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is often referred to as liquidation bankruptcy. It allows individuals to discharge most of their unsecured debts, such as credit card bills and medical expenses. While it can be a powerful tool for debt relief, one of its key components is that it involves the liquidation of certain assets to pay off creditors. However, in many cases, if your car is exempt, you can keep it while eliminating your other debts. For car owners facing repossession, Chapter 7 provides immediate relief. Once you file, an automatic stay is placed on creditors, preventing them from taking any action against you, including repossession. However, if you are behind on car payments, the lender may request the court’s permission to repossess the car. If your car is considered non-exempt and has significant value, it might be at risk of being sold to pay off debts.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows you to keep your assets, including your car while reorganizing your debt into a manageable payment plan. Instead of discharging your debts outright, Chapter 13 consolidates them into one monthly payment that you will pay over a period of three to five years. This option is particularly useful for individuals who want to catch up on missed car payments and avoid repossession.

Unlike Chapter 7, Chapter 13 gives you more time to resolve your car payment arrears, as long as you can make the necessary payments under the new payment plan. The automatic stay prevents any creditors, including your car loan provider, from taking action against you during the bankruptcy process. This can be an effective solution if you want to keep your car and work out a payment plan that fits your budget.

Which Bankruptcy Is Best for Keeping Your Car?

Deciding between Chapter 7 and Chapter 13 depends largely on your financial situation. If you have little to no equity in your car and are eligible for Chapter 7, this could be the fastest and most cost-effective way to eliminate your debts and keep your vehicle. However, if you’ve fallen behind on payments and your car is at risk of repossession, Chapter 13 may be a better option, as it gives you more time to catch up on payments while protecting your car from repossession.

Bankruptcy can be an invaluable tool in saving your car from repossession, but it’s important to understand the differences between Chapter 7 and Chapter 13. Whether you’re looking to eliminate your debts or reorganize them, choosing the right bankruptcy option can give you the relief you need to get back on track. For more information on how bankruptcy can help protect your car, contact The Law Office of Calvin Craig today. Our team is ready to help you find the best solution for your financial situation.