As a reasonable question to many individuals considering bankruptcy, the questions of whether an individual must continue paying auto loan debts after bankruptcy often arise. The answer to that question, however, depends on the chapter of bankruptcy being filed, as well as a few other case-specific considerations, such as the status of the auto loan. For answers to these questions and more, the only definitive source of information in light of your individual and personal bankruptcy case will be through consulting with a bankruptcy lawyer in your state.
Auto Loans in Chapter 13 Bankruptcy
If a person wishing to file for bankruptcy intends to keep his or her vehicle with a lien currently attached, they must continue to make payments during a Chapter 13 filing. If the individual filing for Chapter 13 is currently behind on car loan payments (without the car being repossessed), he or she can automatically stop all collection attempts via the automatic stay provisions in bankruptcy. Following this, an individual can elect to continue to make payments and repay the amount in arrears via the payment plan in Chapter 13. Until the exact specifications of a Chapter 13 filing are outlined, an individual must continue making payments on their auto loan, if they wish to retain the vehicle.
It is notable that certain persons filing Chapter 13 may elect to no longer keep their vehicle. If this is the case, they should consult with their bankruptcy trustee and a lawyer concerning how to return the vehicle, as well as when they should discontinue making payments on the auto loan. The process of returning vehicles will vary.
Auto Loans in Chapter 7 Bankruptcy
During and before a Chapter 7 filing, an individual must decide if they wish to keep the vehicle. If they elect to keep the vehicle, they must continue to make payments as expected. Most, if not all, auto loans are secured debts, secured by the vehicle itself. Failure to make payments will result in repossession. While the automatic stay period temporarily prevents repossession, if the debtor wishes to retain the vehicle following a Chapter 7 filing, they must continue to make payments. Depending on the lender, an individual in Chapter 7 can continue paying for their vehicle via an auto loan through different methods, including redemption (pay for the vehicle in full in a lump sum), reaffirmation (enter into a new auto loan contract of similar terms to the original), or ride through agreements (which allow the loan to continue as it was prior to filing Chapter 7).
Getting Legal Help with Paying Auto Loans during Bankruptcy
In reality, the individual wishes of each individual consumer, in light of the chapter of bankruptcy under which they file, will dictate whether they should continue paying auto loans during and following filing for bankruptcy. Consult with a bankruptcy lawyer to learn more about your individual auto loan during bankruptcy, as well as for answers to other similar questions.
