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What happens if car gets totalled

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    What happens if car gets totalled

    I'm currently in the middle of a ch13 plan with less than 100% payback.
    it just occurred to me that I don't have gap insurance on my car and it's underwater. The car is under the plan but I pay directly.

    What would happen if the car gets totalled?
    Am I on the hook for the balance, or would it be rolled into the bankruptcy?

    Also would they allow me to get a replacement car for the same payment I was making?

    #2
    I would strongly recommend you upgrade your policy; if the monthly difference in the cost of insurance is onerous, talk to your attorney.

    With that business out of the way, as I understand it, some insurance companies can be prevailed upon to at least pay the outstanding loan if your car is underwater, but that is no sure thing.
    Latent car nut.

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      #3
      Assuming not 0% or 100% payback. I believe in most districts, you can't just make the old loan disappear once you decide to keep the car. Your insurance settlement pays for the car but usually it's not enough. Any deficiency has to be repaid through the remainder of the plan which might reduce your old auto loan payment but I'm not sure if the deficiency is treated as unsecured or not. Then you get another auto loan with trustee permission if you have remaining disposable income going to unsecured creditors on a less than 100% plan. In effect, your unsecured creditors are taking one for the team to get you another vehicle loan so you can get to work.

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        #4
        It's always best to talk to your attorney. I really wish they would give us advice before filing, but I know it's more complicated with the laws about what the attorney can or cannot say.

        In my case we are stuck with a loan, the car has too many repairs and still about a year to go on payments, plus my plan has a step so when it's paid off that amount goes into our plan.

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