What happens to vehicles in Ch 13?

[Sunshine]

Do you have to be current on your auto loan to keep a vehicle?

I am married, will probably file by myself since most debt is in my name. We have two vehicles, current on one, 2 payments behind on the other. The balance we owe on the one that is behind is more than the car is worth. An attorney we spoke with talked about a cram down on it. But do we need to be current on it to do that?

Any help or insight would be greatly appreciated!

[HHM]

You just have to pay off the behind payments as part of your chapter 13 plan, so to answer your question, no, you don't have to be current on your car payments to file a 13, but you have to account for the past-due payments in your chapter 13 plan.

The other thing you can do with cars is reduce the amount you pay off to the present market value of the car. For example, lets say you have a car that is with $10,000 but you owe $15,000 on the day you file Chapter 13. When you prepare your plan, you can propose to pay off the car at $10,000 instead of $15,000, so long as you have the diposable income to do it within the time frame of the plan.

[Sunshine]

Thanks for your response.

Sorry, but I have a few more questions to clarify this in my own mind . . . does the auto finance company have to agree to the payment plan? Can they challenge it and make us give up the vehicle? Do they have to accept the "cram down"? I'm just trying to make sure I can keep this car if I file and if there's a chance I might lose it, I need to figure out what we are going to do for a second vehicle since we both work and need transportation.

Thanks and sorry if I am being a pest!

[HHM]

They have to accept the cram down (that is why it is called a cram down), what gets disputed is the value of the vehicle and the interest rate that is to be applied in the cram down.

The issue with cram downs is whether you can afford the cram down and pay off the other required or priority obligations (if any).

[Sunshine]

Thank you once again. That was very helpful to me.