When filing chapter 13 should I continue paying car payments?

When filing personal bankruptcy, you should continue paying car payments in chapter 13. Chapter 13 is one of two personal bankruptcy options. However, it is the only bankruptcy option that allows you to keep property such as your car. If you’re behind on your car payments and are filing for chapter 13, you will be expected to keep making future payments while in bankruptcy. The future payments are in addition to the monthly payments you’re expected to pay to the bankruptcy trustee through a repayment plan. The repayment plan last approximately three to five years. During that time, the bankruptcy trustee distributes the monthly payments to your creditors. The priority creditors such as your auto loan company or mortgage lender are paid first. Then your other debts are paid.

If you fail to make your future car payments to the auto loan company, then the company can seek to lift the automatic stay. The automatic stay is the vital part of the chapter 13 because it prevents creditors from taking property, filing lawsuits or garnishing wages.

Bankruptcy—especially chapter 13—is a very complicated issue. For instance, if you owe more on your car than what’s it is worth then the U.S. Bankruptcy Court has a provision that reduces the money you owe on your loan. This is called a cramdown. So it’s best to seek legal help. A bankruptcy lawyer can tell you what to expect during the bankruptcy and which bills you should pay when filing a chapter 13.