Chapter 13 bankruptcy is a legal process in which debtors use their disposable income to pay off their debts. Virginia debtors who are in some stage of the Chapter 13 bankruptcy process may find that it is possible to purchase a new vehicle or keep the one that they have already purchased; however, the process they use may vary.
Chapter 13 filers could be able to maintain possession of their vehicle except in certain circumstances. Car payments that are extremely high might prompt the court to prohibit the payments from being included in the calculation for disposable income. Debtors who are upside down on their loan may use a cram-down loan, which allows the amount of the loan to be reduced to the amount the vehicle is worth in cash. However, in order to be eligible, the debtor would have had to purchase the vehicle at least two and a half years before filing for bankruptcy.
For debtors who are delinquent with their vehicle payments, repossession will be stayed by filing the bankruptcy. While filing for Chapter 13 bankruptcy does not guarantee that the debtor will be able to keep their vehicle, the payment in arrears can be included in the bankruptcy plan. If the debtor remains current on future payments, it is likely they may retain possession of their vehicle.
To purchase a new vehicle during Chapter 13 bankruptcy, it is necessary to locate a lender that will provide financing for bankruptcy filers. Debtors could require a special finance dealer that offers subprime lending options.
A bankruptcy attorney may evaluate a client's debts and their income and explain how filing for Chapter 13 bankruptcy might help them pay off their debts. Assistance may be provided for creating a payment plan based on the client's disposable income.