Tennessee residents who have substantial debts may use the Chapter 13 bankruptcy process to address them if they have a regular source of income. This type of bankruptcy requires the court to approve a repayment plan that lasts either three or five years. If they own a vehicle before filing for bankruptcy that they want to keep, or if they want to purchase one during or after they process, this may be possible.
Chapter 13 bankruptcy filers may generally retain ownership of the vehicle they own before filing for bankruptcy. However, there are some situations in which they may not be allowed to do so.
If the monthly auto payments are overly high, the debtor would be prevented by the court from using that payment to calculate disposable income. The Chapter 13 bankruptcy process allows filers to keep money that is to be applied to sensible and necessary living expenses. Such a large payment could affect the repayment schedule.
For debtors who have upside down loans and want to file for bankruptcy, a loan cramdown may be ideal. After reducing the loan amount to the vehicle’s cash value, the remaining amount may be classified with the other unsecured debts. However, in order to use this tactic, the debtor would have to had purchase the vehicle at least two and a half years before filing a bankruptcy petition.
Chapter 13 is just one form of debt relief that might be available to consumers. An attorney can outline the eligibility and other requirements and describe its pros and cons.