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Can Chapter 13 bankruptcy help you keep your financed vehicle?

Perhaps the most crucial benefit provided by a bankruptcy filing is the discharge of your unsecured debts. For those who had to live on credit cards after losing their job or coping with the astronomical medical debt that often comes with cancer treatments, the discharge received at the end of bankruptcy proceedings will be the biggest benefit of a successful filing.

However, the average American owes as much, if not more in secured debt as they do in unsecured debt. Your mortgage is probably your biggest line of secured credit, but you may also have a vehicle loan worth tens of thousands of dollars that still has years of payments before you pay the loan off and the vehicle is yours.

Can Chapter 13 bankruptcy help you address your debts while keeping a financed vehicle?

Yes, Chapter 13 bankruptcy helps those with past-due secured debts

Your secured debts, like your vehicle loan, are easier for creditors to collect on than unsecured debts. After all, the lender can repossess your vehicle if you don’t make payments. Obviously, losing your transportation when you are already experiencing financial hardship would be a devastating blow.

Filing for chapter 13 bankruptcy helps you avoid the worst possible outcome to the situation in two ways. The first is through the protection of your investment in the vehicle thus far. Your equity in the vehicle could disappear in an instant if the lender repossesses the vehicle before you file for bankruptcy. If you file after missing payments and prevent repossession, you can preserve that equity if you retain the vehicle and reaffirm the loan.

The second benefit of Chapter 13 bankruptcy if you are behind on payments is that you could potentially renegotiate your vehicle loan. You could extend how long you have to make payments, reduce your monthly payments or even make different arrangements for the payments that you have already missed instead of needing to catch up on all of them at once.

Most people working through a structured repayment program will also benefit from the eventual discharge of their other debts, which will give them more space in their budget for their biggest monthly costs, like their vehicle loans. Learning more about Chapter 13 bankruptcy can help you protect your most valuable property, like your motor vehicle, during times of financial difficulty.