It’s important to keep a car. We all know this. We need to get to work, and we need to shop for our family. Sometimes our circumstances change and a vehicle loan that was once affordable, well, no longer is. The law recognizes this and wants to help.
A Chapter 7 bankruptcy filing allows you to “redeem” your car from its loan by paying the car’s value to the lender and discharging the balance. A Chapter 13 filing allows this also, so long as the loan is either more than 910 days old when you file or the loan was not used solely for the car’s purchase. (A secured car loan made after a car’s purchase is not for the car’s purchase. A rollover loan for both a new car purchase and a trade-in car’s loan balance may not be solely for the car’s purchase – courts have split on this.) This is great news when a car is “underwater,” where the loan is greater than the car’s value.
If your finances are stretched and you cannot come up with the cash to pay the value of your car, there are lenders who will consider financing a redemption. These are high-interest loans, but they still can make sense if the car loan balance is seriously higher than the car’s value. Your attorney can help you find a lender, guide you on valuing your car, and help you with the redemption decision.
Carolyn Secor is a Clearwater bankruptcy attorney and Clearwater foreclosure attorney serving Palm Harbor, New Port Richey, Oldsmar, Tarpon Springs, Seminole, St. Petersburg, and the Tampa Bay area.