If you have filed for Chapter 13 bankruptcy in Kentucky, it may be possible to obtain a new car while the case is still ongoing. You can also take steps to keep the car that you currently own. Let’s take a look at some of the precise ways that bankruptcy influences your ability to own a car.
How bankruptcy helps you keep your car
When you file for bankruptcy, you are typically entitled to a stay of creditor contact and collection activities. This means that an auto lender is generally temporarily unable to repossess your vehicle regardless of how much you may currently owe on it. It may also be possible to ask for a cramdown in a Chapter 13 case. Finally, you may be given an opportunity to catch up on missed payments as part of a Chapter 13 repayment plan.
A cramdown turns negative equity into unsecured debt
If the cramdown is granted, you only owe what the car is actually worth when the request is made. The difference between what you owe and what the car is worth becomes unsecured debt. In many cases, this will reduce the monthly payment made to lenders or otherwise make it easier to afford the vehicle.
How to apply for a new car loan
If you want to get a new car while your bankruptcy case is still open, you will need to obtain the trustee’s permission to do so. The next step is to find a dealer willing to work with people who have filed for bankruptcy. The dealer will create an offer sheet that will be submitted to the trustee and the judge in the case for approval. If the loan is approved, you can complete the transaction and become the owner of a new or used vehicle.
Working with an attorney may make it easier to understand the impact that bankruptcy could have on keeping your car or buying a different one. Legal counsel can outline the eligibility requirements of Chapter 13 and help to prepare the payment plan to be submitted to the court for its approval.