What Happens To Vehicles In Bankruptcy? | Whittier, CA Chapter 13 Bankruptcy Lawyer Explains

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Law Offices of Nicholas Gebelt
15150 Hornell St
Whittier, CA 90604
(562) 777-9159

It depends if you have a vehicle paid off, free and clear, you get to keep it. You might wonder about that, in the Chapter 7, if I can exempt the equity in the car the trustee will see is it. Well, that doesn't happen in a Chapter 13, because in the Chapter 13, you enter into a multi year debt repayment plan that's administered by the bankruptcy court. The plan has to satisfy a few requirements. If you can propound a plan that satisfies those requirements, then the judge will confirm the plan and you make the payments to the Chapter 13 trustee according to the terms of the plan. So since the creditors are getting paid, then the trade-off is you get to keep all of your assets. So if the car is paid off free and clear, you get to keep it.
Let’s suppose it's not paid off, free and clear. Well, in the Chapter 13, you can either surrender the vehicle and put the post resale deficiency in as an unsecured debt or you can keep making those regular monthly payments on the car. If you have a pre-petition arrearage and you fell behind on the payments, will stick the arrearage into the plan and you can spread the paying off of that arrearage over the five years of the plan. Generally, you do get to keep the vehicles if you're in a Chapter 13 provided that if there are debts against the vehicles, you make those payments and those payments have to be made just like clockwork on time every single month and directly to the creditor. In the Central District of California, we don't have Conduit Payments. If you have a secured debt, you make those payments directly to the creditor, but if you have a pre-petition arrearage on the debt, then that arrearage goes into the plan and it's paid through the Chapter 13 trustee.

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