Car Payments

In a Chapter 7 bankruptcy, the debtor has to continue making the regular monthly payments if he/she wishes to retain their interest in the vehicle.  If the individual who files the Chapter 7 no longer wishes to keep the car, then they can surrender their interest in the vehicle and the entire amount of debt will be discharged.  That is extremely beneficial if the debtor no longer wants the car.

A Chapter 13 bankruptcy can help with the car payments and interest as well.  If the car is relatively recently financed, then the interest rate and payment is usually reduced if the car is paid through the Chapter 13 Plan.  If the car was financed over 2.5 years prior to the Chapter 13 petition being filed, then the debtor is able to “cram down” the note on the vehicle.  That means that the debtor can pay the value of the vehicle rather than the amount of the debt through the Chapter 13 Plan.  The amount owed above what the car is worth is discharged, just like the credit card debt.  That almost always substantially reduces the monthly payment on the vehicle.